Transport for

Annual Report and Statement of Accounts 2010/11

MAYOR OF LONDON Contents Contents

Message from the Mayor 4 Improve the safety and security of all Londoners 32 Commissioner’s foreword 6 Spotlight: Safety first 34 The year at a glance 8 Spotlight: Look out for your mates 36 Operational performance 10 Improve transport opportunities for all 38 Effective and efficient business operations 12 Spotlight: Transforming lines and lives 40 Progress on the Mayor’s Transport Strategy 14 Reduce transport’s contribution to climate change Support economic development and population growth 16 and improve its resilience 42 Spotlight: Vital London 18 Spotlight: Clean, green and red all over 44 Spotlight: A Capital crossing 20 Spotlight: Plug in, power up… go! 46 Spotlight: Victoria reigns 22 Support the delivery of the London 2012 Olympic and Spotlight: Tunnel visions 24 Paralympic Games and its legacy 48 Spotlight: 2012 and beyond 50 Enhance the quality of life for all Londoners 26 Spotlight: Shipshape in Brixton 28 Statement of Accounts 52 Spotlight: Pedal power 30 Annual Governance Statement 184 Chief Officers 190 Members of TfL 191 Directors of Crossrail Ltd 193 Membership of TfL panels and committees 194 Remuneration 196

2 Transport for London > Annual Report and Statement of Accounts 2010/2011 Contents 3 Message from the Mayor Contents

At the beginning of the 20th In the early 1990s the tide began to turn. Clapham Junction and Surrey Quays to create a Population, jobs and confidence returned. An array seamless rail link around the city. century London was the capital of infrastructure investments made that prosperity I’m thrilled so many have taken to two wheels possible including the Jubilee line and Docklands of the world. following the launch of my flagship Barclays Cycle Light Railway (DLR). When we look at London Hire Scheme. Our distinctive blue bikes have We were the global centre of banking, we today we see incredible potential. However, every become part of the fabric of London life and I exported clothes to India and China, we imported Londoner knows our ageing transport infrastructure believe we will become one of the world’s great timber from Canada and sold it back as tennis can lead to delays and inconvenience. racquets, and all that wealth was created with cycle-friendly cities. Victorian capital and 19th century infrastructure. In a year when public sector finances were On the roads we have removed unnecessary squeezed the Government’s agreement to traffic lights, re-phased others and introduced In 1836 the world’s first commuter railway brought commit funding for our transport modernisation a permit scheme that forces utilities to get clerks and office workers into the City and 20 years programmes was vital. My argument was simple: permission before they can dig up our roads. later it was the world’s first underground railway London is the UK’s economic engine room and its However, more can be done and my team are that showed the daring and invention of this city in prosperity is at the root of the country’s return to working on further plans to improve the flow dealing with the problems of mass transit. economic health. As a result the Tube upgrades of traffic. will continue and Crossrail alone will provide a 10 The Victorians built the first tunnel under the challenges that arise; and to continue to build per cent increase in London’s rail capacity. Thames and virtually every bridge that now spans Crime on the transport system continues to fall the infrastructure and run the crucial transport as the result of a productive partnership between the river. Right up to the Second World War our Yet even the act of modernisation causes services that keep our great city moving. TfL, the Metropolitan Police and the British city continued to boom. But a post-war loss of disruption from closures and teething troubles Transport Police. Our Tubes, trains, buses and confidence saw us fail to make the investments as new infrastructure beds in. But Transport for stations are now low-crime environments. We will necessary for long-term competitiveness. London (TfL) is making real progress on reliability. make them even safer. We failed to upgrade the Tube – and I could take The system is experiencing fewer failures and you to see bizarre 1930s Bakelite fuses and knobs recovering faster if they do happen. Improved reliability, increased capacity and a safer travelling environment are critical to the success that are still being used to this day at Edgware Last year we took a step closer to the completion of the 2012 Games next year. This will be the first Road. In the course of an entire century we built of an orbital railway with the opening of ‘public transport’ games and we are well prepared. only one new bridge east of the Tower of London. London Overground’s line. It has We ran our Routemaster buses into the ground boosted communities in the east and south by So it has been a good year. But we are not and lacked the energy to replace them with a new and providing improved access to jobs and leisure complacent. More must be done and I have bus specifically suited – as the Routemaster was – Chairman of Transport for London opportunities. Next year we will connect the best possible team in place to tackle the to the needs of this Capital.

4 Transport for London > Annual Report and Statement of Accounts 2010/2011 Message from the Mayor 5 Commissioner’s foreword Contents

This year TfL carried a record Operational performance is, of course, a significant improvements to the way the Tube key priority. Reliability is improving, but we upgrade programme is managed, with dramatic number of passengers and fully recognise that we must constantly reductions in weekend closures. Better still, operated more services than improve what we do to minimise disruption we’ve been able to cut costs substantially. and the inconvenience it causes, particularly We are on track with our preparations for the ever before. interruptions to services at the busiest times of 2012 Games. All the infrastructure is in place It has achieved this while managing the biggest the day. and we are continuing to work closely with our upgrade and investment programme seen across The Government Spending Review was good partners and local communities to ensure a the Tube and rail for generations. news for TfL. We had to take our share of successful event. This has been coupled with an ambitious cost the pain of the Treasury’s deficit reduction All of this was achieved due to the hard work of saving exercise to protect frontline services. programme, but we kept the funding necessary TfL staff, our contractors and many partners. My Our previous savings target of £5bn has been to upgrade the Tube, build Crossrail and maintain thanks to them all. revised to £7.6bn – with £4.6bn of that already London’s comprehensive bus network. secured. The salaries of senior staff were frozen With funding secured, our major projects are for a second year running and the Chief Officers progressing well. Crossrail is on track with and I declined our performance pay awards. many of the big contracts already let and The number of director-level posts at TfL is construction under way at sites across the being reduced by 25 per cent and our support Peter Hendy CBE city. Since TfL took over Tube Lines and ended functions are being rationalised. Commissioner the failed PPP, we have been able to make Transport for London

6 Transport for London > Annual Report and Statement of Accounts 2010/2011 Commissioner’s foreword 7 The year at a glance Contents

London The first air- The western Overground’s conditioned extension of the East London Tube goes into Congestion route opens to passenger service Charging zone the public Spending Review is removed London Bus crime is at secures vital Overground’s its lowest level investment East London route for six years in London’s extension to Highbury key transport & Islington opens projects

April May June July August September October November December January February March 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011

Barclays Cycle Three-car TfL secures Hire and the first trains increase funding for two Barclays Cycle capacity on DLR 90 extra hybrid buses All Tube Superhighways upgrades launch A new platform Barclays Cycle now under TfL at Stratford Hire journeys reach control following Regional Station 2.5 million just six the end of the opens ahead of months after the Public Private 2012 Games scheme’s launch Partnership

8 Transport for London > Annual Report and Statement of Accounts 2010/2011 The year at a glance 9 Operational performance Contents

Buses Docklands Light Railway 2010/11 2009/10 2008/09 2007/08 2006/07 2010/11 2009/10 2008/09 2007/08 2006/07

Passenger journeys (millions) 2,289 2,257 2,247 2,176 1,880 Passenger journeys (millions) 78 69 66 67 61 Kilometres operated (millions) 486 483 478 468 458 Kilometres operated (millions) 4.7 4.6 3.9 4.4 4.4 Percentage of schedule operated On-time performance (per cent) 97.4 94.8 94.6 97.3 97.8 (per cent) 97.4 97.1 97 97.5 97.5 Passenger satisfaction (score) 81.4* 91.9 92 97.3 96.8 Excess wait time (high frequency) (minutes) 1.0 1.1 1.1 1.1 1.1 Note: *During 2010/11, the scoring system changed from the previous Serco measure to the TfL CSS measure. Passenger satisfaction (score) 80 79 80 79 78 For comparison the score for 2010/11 using the previous measure was 94.9

Note: The methodology for calculating bus passenger journeys changed from April 2007 and the re-based figure for 2006/07 for comparison is 2,069 million. The figure for bus passenger journeys in 2010/11 reflects a change in the method for calculating child journeys. The comparable figure for 2009/10 is 2,265 million journeys. London Tramlink 2010/11 2009/10 2008/09 2007/08 2006/07

Passenger journeys (millions) 27.9 26.5 27.0 26.3 24.8 2010/11 2009/10 2008/09 2007/08 2006/07 Kilometres operated (millions) 2.7 2.6 2.7 2.6 2.5 (per cent) Passenger journeys (millions) 1,107 1,065 1,089 1,072 1,014 Planned kilometres delivered 98.6 98.6 98.4 99 99.3 (score) Kilometres operated (millions) 68.9 69.4 70.6 70.5 69.8 Passenger satisfaction 85.3 86.3 86 85 84 Percentage of schedule operated (per cent) 95.6 96.6 96.4 94.8 94.5 Excess wait time (weighted) (minutes) 6.5 6.4 6.6 7.8 8.1 London Overground Passenger satisfaction (score) 79 79 79 77 76 2010/11 2009/10 2008/09 2007/08 Kilometres operated (millions) 5.2 3.4 3.4 n/a On-time performance (per cent) 94.8 93.2 92.2 91.4 Passenger satisfaction (score) 80.3 78.5 73 n/a

Note: London Overground services started operation in November 2007. Previously, services were operated by Silverlink Metro. Journey data are not reported at present as passenger numbers are derived from revenue allocations based on passenger surveys and can only be considered as estimations. TfL is currently introducing a new fleet of trains on to the London Overground network. These trains have a weighing system which should allow passenger data to be provided in future years.

10 Transport for London > Annual Report and Statement of Accounts 2010/2011 Operational performance 11 Effective and efficient business operations Contents

During 2010/11, TfL has London Underground • Reduced labour costs through process increases in demand. A foundation has been put In 2010/11, London Underground has delivered improvements and use of new technology (eg in place for future technical initiatives that will continued working on and savings of £335m, against a target of £247m. 90 posts relating to data collection have been bring further benefits. These efficiencies build on the foundations laid saved following the introduction of iBus) embedding the expanded TfL disposed of its interest in the Shard at in 2009/10. Savings this year were achieved from: efficiencies programme, which is London Rail London Bridge, choosing to make better now in its second year. • Continued value engineering and procurement Savings of £9m have been achieved during use of its existing property portfolio – strategy reviews on capital projects. Examples 2010 /11 as a result of the organisational generating significant savings in this and The programme comprises around 250 include the track renewals and bridges and civil restructuring carried out during the previous future years. Buildings with a total capacity individual initiatives across the whole of the engineering renewals contracts which introduce year and the ongoing focus on cost control of 1,290 workstations were also disposed of organisation – streamlining back office and sharing of both cost overruns and efficiency of overheads. during 2010/11. In addition, desk sharing was support functions, generating additional savings with the contractors on each framework implemented at Palestra which released more secondary revenue and cutting out the lowest Corporate than 400 workstations. • Reduced maintenance costs through contract priority areas of expenditure. Savings of £21.5m have been achieved this consolidations, allowing contractors to plan year through the termination of the Prestige Savings have also been achieved in Finance, Total gross savings achieved across the business delivery in a more strategic fashion PFI contract for the provision of Oyster, which HR and Information Management through aligning finance and performance activities in 2010/11 amount to £630m, against a target • A reduction of around 800 back office roles has been replaced by the more efficient Future and restructuring. of £526m. The net position is £587m against a following a review of support services Ticketing Agreement. target of £447m. This has been achieved through Work has continued to ensure that TfL completion of the majority of planned activities, • A cut in 800 management and operations roles The Customer Contract Transformation procures better value contracts – with specific identification of substitute and additional as a result of ticket office changes designed to Programme successfully implemented focus on engineering and construction, initiatives where those initially scoped have improve customer service by moving staff out technological changes which allow customers information management, operational services proved unachievable, and acceleration of some to areas where passengers need them to get travel information by telephone and corporate support. activities from future years with benefits arising without having to speak to a call centre agent. Surface Transport commensurately earlier. Technology has also been deployed which Expenditure on non-permanent labour has Surface Transport has achieved savings of enables customer enquiries to be routed and dropped by £22m since 2009/10 as a result of Total cumulative net savings since the £142m against a target of £136m. managed by different contact centres and allows concerted efforts to standardise and reduce efficiencies programme began are £800m, Ongoing savings have been made through: staffing levels to be more closely matched to rates and reduce the use of contractors and £216m (37 per cent) ahead of target. This demand. These actions have enabled TfL to temporary staff. represents more than 10 per cent of the £7.6bn • Re-procurement and renegotiation of key reduce operating costs and improve customer of savings planned in the entire programme. The contracts (eg bus network contracts, and service by responding more effectively to rapid actions completed so far will create £4.6bn in energy costs) savings by 2017/18.

12 Transport for London > Annual Report and Statement of Accounts 2010/2011 Effective and efficient business operations 13 Progress on the Mayor’s Transport Strategy Contents

Demands on London’s transport network and roads are certain to grow in the coming years. Over the next two decades, the Capital’s population is expected to increase by 1.25 million and jobs by 750,000. In May 2010, following extensive consultations, the Mayor of London published a new transport strategy, setting out his goals and aspirations for the transport network over the next 20 years. These are aimed not only at increasing capacity but also bringing improvements in comfort, speed and security, and helping London meet its climate change and environmental targets. The Mayor’s Transport Strategy (MTS) identifies six goals: • Support economic development and population growth • Enhance the quality of life for all Londoners • Improve the safety and security of all Londoners • Improve transport opportunities for all Londoners • Reduce transport’s contribution to climate change and improve its resilience • Support delivery of the London 2012 Olympic and Paralympic Games and its legacy The following pages highlight the progress TfL has made in meeting these goals.

14 Transport for London > Annual Report and Statement of Accounts 2010/2011 Progress on the Mayor’s Transport Strategy 15 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Support economic development and population growth Contents

This MTS goal is being addressed per cent. The longer trains are already running between Bank and Lewisham and the entire by the biggest investment network will be upgraded by the end of 2011 programme on the Capital’s • On TfL’s road network, 1,008 traffic signal timing transport network since the reviews during the year contributed to a 7.9 second world war. per cent reduction in stop-start traffic delays. Also, SCOOT (Split-Cycle Offset Optimisation Work continued on numerous projects during Technique) was installed at 225 traffic lights. 2010/11, and in some cases was completed, as the SCOOT helps smooth traffic flow by using following highlights show: detectors in the road to change timings • The new signalling system on the Jubilee • Almost 1,315 days of disruption on London’s line began operating over much of the line in roads were prevented, thanks to better December, and the full upgrade is due to complete coordination of utility works following the in June 2011. Journeys are already quicker for introduction last year of the London Permit many passengers, and the first of a phased series Scheme for Roadworks and Streetworks. Under of timetable improvements, with more frequent the scheme, utility companies must apply for a services, will follow at the end July 2011 permit to dig up roads – or face a penalty. The Mayor is also urging Government to give him the • Track and platform works and train testing took legal powers to introduce a lane rental system place on the Circle, District, Metropolitan and for utility companies carrying out roadworks Hammersmith & City lines to enable new walk- through, air-conditioned trains to run. The trains • CC Auto Pay, an automated system that allows began being phased in on the Metropolitan line drivers to pay the Congestion Charge online, was introduced in January. By April more than • Changes to the Northern line fleet – involving 115,000 people had signed up to the scheme, more than 3,000 wiring alterations to each of the which uses cameras to record the number of 106 trains – were completed in preparation for a days a vehicle travels within the zone and bills new signalling system the driver accordingly • The Public Private Partnership came to an end in • Work to increase capacity and relieve congestion June when TfL acquired infrastructure company at key Tube stations continued. At Tottenham Tube Lines. The deal means that TfL has far Court Road surrounding properties were greater control over how the Tube upgrade demolished and excavation got under way. Work works are carried out also began on a new entrance and ticket hall at • Engineering works continued on the Docklands Bond Street and a new ticket hall at Paddington. Light Railway (DLR) to allow three-car trains The main Victoria ticket office was expanded to be introduced, increasing capacity by 50 and re-opened (see page 22)

16 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support economic development and population growth 17 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Vital London Contents

The Capital’s essential role in • Steel rail track is supplied by a Lincolnshire- based company where around 40 jobs are the UK economy was recognised supported by TfL contracts. Track timber is by the Government in October also bought from Lincolnshire and loose 2010’s Spending Review, when stone track support is quarried in Yorkshire and Scotland it protected investment for vital • TfL’s traffic control systems come from transport projects in London. suppliers in Co. Durham, Cambridgeshire and Crossrail, Europe’s largest infrastructure rail Berkshire which employ more than 600 staff project, will, with the full Tube upgrades, provide a Commenting on the Bombardier order, the £78bn boost to the UK economy and dramatically leader of Derby City Council, Harvey Jennings, improve capacity and rail links in the South East. pointed out: ‘These contracts are bringing But it’s not just London that is set to benefit. around £3bn into the East Midlands economy. A host of manufacturing, engineering and Many people have said that London receives construction jobs are being created across Britain. more than its fair share of investment, but this proves that investment in London benefits For instance, an order for 2,000 train carriages other regions and helps sustain the UK’s Strong backing from business MPs, business leaders, transport groups and ‘Working with the Mayor and enabled Derby-based global transport company manufacturing industry.’ London businesses, we successfully Bombardier to create 400 manufacturing, other organisations all showed strong support campaigned to secure vital investment engineering and technical roles, boosting the There are other gains besides. For instance, for the need to secure investment in London’s number of workers at the company’s main site TfL’s research and trials into low-carbon bus transport network, recognising its importance to to take forward the upgrade of the to 3,000. Around 8,000 jobs within Bombardier’s technology have spurred other UK cities the city’s future growth and success. Tube and the construction of Crossrail, supply chain are also supported. into similar efforts. And with more bus maintain frontline services on the manufacturers needing to invest in vehicle More than 100 leaders from the Capital’s business community, coordinated by London extensive bus network and expand Forty of TfL’s 100 largest suppliers are developments to win transport contracts, there London’s popular Barclays Cycle Hire.’ headquartered outside the Capital, with their First, wrote to the Transport Secretary. And in are environmental and health gains as well as Peter Hendy, Commissioner, TfL supply chains and manufacturing facilities spread economic improvements (see page 44). a cross-party letter to the Chancellor, London widely. For example: Assembly Members argued that Crossrail and ‘It’s great news for London’s businesses the Underground were vital to the UK’s • Tube escalator refurbishment and economic health. MPs from all parties also that the Government has recognised installations are contracted to companies joined to sign a motion backing investment in that investment in the Tube and in Leeds and Glasgow the Tube and calling on a Government Crossrail is vital to secure future commitment to Crossrail. economic growth – not just for the Capital but the whole of the UK.’ Sara Parker, Director, CBI London

18 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support economic development and population growth 19 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: A Capital crossing Contents

Constructing 42km of tunnels related work, such as permanent access and ventilation shafts, will generally be removed by underneath central London, road before being transferred to the river. while causing minimal disruption During the project a total of seven million cubic and avoiding Underground lines, metres of material will be excavated – the sewers and building foundations, equivalent of covering the whole of Hyde Park and with a three-metre is no easy task. layer of soil. More than five million cubic metres Yet that’s the challenge set to the companies of material excavated from the project will be awarded the main tunnelling contracts for transported by boat along the Thames for use in Europe’s largest civil engineering project. landscaping projects. When construction is complete in 2018, the Skills legacy benefits will be huge. Crossrail will boost As well as providing much-needed additional rail London’s rail capacity by 10 per cent, enabling new capacity, Crossrail has an important role to play in journey opportunities and faster journey times supporting regeneration and the economy, and in with up to 24 trains an hour between Paddington creating a skills legacy. and Whitechapel during peak periods. Construction work started in November 2010 Around 21km of twin-bore tunnels will be built, on a Tunnelling and Underground Construction with work due to begin in late 2011. The first Academy at Aldersbrook sidings near Ilford Town boring machine starts out on its journey in spring Centre. Tackling the shortage of people with the 2012. From then on, teams of construction necessary training to work on Crossrail and other workers will work round the clock to create the tunnelling projects, the academy will provide tunnels that will carry Crossrail passengers across training for the key skills required. Faster by Crossrail London in minutes. ’Crossrail is a critical project for It will be open by September 2011, and over this country, with the potential to Journey 2010 Crossrail Minimising disruption the lifetime of the project will offer training journey journey generate wider economic benefits All construction projects by their nature in underground construction to at least 3,500 time time for UK GDP and allow the creation result in some degree of disruption. But it people. After Crossrail has been completed, the of tens of thousands of jobs.’ Slough to Tottenham Court Road 55mins 36mins is critically important that the impact of academy will remain as a lasting legacy for London and the construction industry, operating as an Teresa Villiers, Minister Ilford to Bond Street 35mins 22mins Crossrail’s construction on central London is for Transport kept to a minimum. independent organisation and long-term provider Heathrow to Street 55mins 36mins of tunnelling skills. More than 85 per cent of excavated material from Liverpool Street to Abbey Wood 40mins 22mins tunnelling will be removed by rail and river, while Paddington to Canary Wharf 30mins 17mins construction material from stations and station-

20 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support economic development and population growth 21 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Victoria reigns Contents

Better access, less congestion • A new North ticket hall with an entrance in Cardinal Place providing additional access to and easier interchanges are the the station principal driving forces behind a • Nine new escalators and seven new passenger massive £700m upgrade to lifts for step-free access to the District, Circle Victoria station. and Victoria lines Victoria is one of the busiest stations on Keeping cool the Tube network. It currently serves nearly All major projects are highly complex and 80 million passengers each year, and this is Victoria is no exception. One of the issues predicted to rise to 100 million by 2016. contractors have had to contend with is underground water seepage. Nearly every day it closes for short periods during the morning and evening rush hours to Normally this water is pumped away to avoid avoid severe overcrowding. And the station flooding, but as part of the station’s redesign has no step-free access, which causes major programme an innovative, environmental difficulties for disabled people and the large process is recycling the water to help cool down numbers travelling through it with luggage platforms. and pushchairs. The water is pumped through specially designed By summer 2016, a new station entrance and units mounted above the platforms. Hot air subterranean ticket hall north of the station from the station is then channelled through the at Cardinal Place will be open and by 2018 the units and chilled by the water, effectively cooling existing Victoria line ticket hall will be enlarged. the platforms and offering much needed relief There will be new escalators and lifts for step- from high temperatures, especially in the ‘Anyone that’s ever been near Victoria ‘More than four million journeys are free access, plus an improved interchange with summer months. Tube in rush hour will know that these made on the Tube each weekday yet Victoria National Rail station. improvements cannot be made soon parts of the network are very old (some enough. It will make journeys easier dating back to the 1860s). The upgrade When the work is finished the benefits will be substantial, including: for the hundreds of thousands of of the Tube has never been as critical to passengers that use the station.’ London’s economic, social and cultural • Increasing the size of the station by 50 per cent Boris Johnson, Mayor of London success as it is today, and without • Enlarging the existing Victoria line ticket hall to continued investment the Tube will cost cut congestion increasingly more to run and become increasingly unreliable.’ Mike Brown, Managing Director, London Underground

22 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support economic development and population growth 23 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Tunnel visions Contents

Amazing but true: TfL figures drawing attention to the high number of avoidable incidents, it is hoped drivers will remember to show Blackwall Tunnel has been check their vehicle is in an appropriate condition forced to close no fewer than and complies with the height restrictions before 1,200 times in nine months they enter the tunnel. simply because drivers failed to TfL’s Chief Operating Officer for London Streets, Garrett Emmerson, puts the figures in heed height restriction warnings stark perspective: ‘For every minute the tunnel or their vehicles ran out of fuel. is closed, it stops up to 60 vehicles getting through,’ he says. ‘On an average day, these The northbound and southbound tunnels are unnecessary closures, many of which occur at used by around 100,000 vehicles a day and peak time, can stop up to 750 vehicles passing although the closures are often for only a through the tunnel.’ few minutes, the resulting queues and traffic congestion can last for hours. To combat this problem, TfL has introduced a number of measures. First, it has been calling on In fact, around a third of London’s serious and Smoothly does it drivers to check before they travel to ensure their severe disruption is caused by roadworks, it is Under the Traffic Management Act 2004, it is up vehicles are well maintained, have enough fuel estimated, at a cost to London’s economy of to TfL and the boroughs to ensure London’s road and, in the case of the northbound tunnel, comply almost £1bn a year. The introduction of the London network runs as smoothly and efficiently with the tunnel’s height restrictions. as possible. Permit Scheme (see page 16) has already begun to make a difference by imposing tighter regulations In early 2011, TfL also began a three-month trial ‘We established a policy area Smoothing the traffic flow increases the reliability on utility companies seeking to dig up roads. with road response police officers based at the called ‘smoothing traffic flow’ not and predictability of journeys, and helps tackle the tunnel to provide an immediate response to any Since its introduction last year, TfL has granted because we want to see more cars stop-start conditions that increase emissions of unplanned incidents, such as breakdowns. The around 48,000 permits but refused 10,000 and driving around London, but to harmful pollutants. team will also be working closely with the Vehicle issued 160 fixed penalty notices to companies reduce frustration and improve and Operator Services Agency to strengthen The Mayor’s Transport Strategy outlines how the working without a permit. journey time reliability for enforcement of vehicle standards on the approach Mayor and TfL will seek to improve conditions on businesses and Londoners who At the same time, TfL has continued with its to the tunnel. London’s roads. rely on motorised vehicles.’ programme of traffic signal timing reviews and A new digital sign has been installed on the ‘Smoothing traffic flow means more reliable journey installation of smarter signal technology (see Garrett Emmerson, northbound approach, showing the number times and more free-flowing travel conditions,’ the page 16). And it has progressed on major road Chief Operating Officer for of over-height and broken down vehicles that Mayor, Boris Johnson, argues. There are a number improvement schemes to smooth traffic flow such London Streets, TfL have stopped traffic in the previous month. By of ways to achieve this, ranging from more efficient as those on the North Circular Road at Bounds use of road space, to looking at parking and loading Green and Henlys Corner, and the removal of the arrangements, traffic signals and roadworks. Tottenham Hale gyratory.

24 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support economic development and population growth 25 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Enhance the quality of life for all Londoners Contents

Progress was made this year on a with equipment to curb pollution and – in the first trial of its kind in the UK – introducing range of projects to enhance the dust suppressant machines that prevent quality of life for Londoners, as dust and other particles from the road being the following highlights show: re-circulated in the air • TfL launched an information campaign to remind • Air-conditioned trains began running on the vehicle operators of lorries, buses and coaches Metropolitan line. The first of 191 new walk- and other types of diesel vehicles already through trains, they will serve 40 per cent of the affected by the Low Emission Zone that tighter network by 2016 emissions standards will come into force from • On the Victoria line, mid-tunnel ventilation shafts 3 January 2012. In addition, owners of larger were upgraded to help reduce the temperature. vans and minibuses are being advised that their More are expected to be upgraded during 2011/12 vehicles will be affected for the first time and will need to meet certain emission standards • Plans continue to expand Legible London, from January 2012 TfL’s pedestrian wayfinding system, following successful trials in central London, Richmond • TfL’s Strategic Walk Network received £1.5m and Twickenham. The system’s on-street maps to ensure its seven routes will be completed in and signs make it easier for people to navigate time for the 2012 Games. The routes are: the areas on foot and are now being incorporated , Green Chain, Jubilee Greenway, into all TfL’s wayfinding information, eg cycle hire , , London Loop docking stations, Tube stations and bus stops and • TfL, together with London boroughs, other • In response to the Mayor’s Better Streets partners and the private sector, is working to manifesto, TfL set up a Design Review ensure the installation of 66,000 new cycle Panel to carry out audits of urban realm parking spaces in London by the end of 2012. improvement schemes valued at more than More than 46,000 are already on streets, at £2m. This will ensure the schemes meet stations, workplaces, schools and at new required quality standards building developments and 55,000 will be • Through the provision of Local Implementation delivered by March 2012 Plan funding, TfL has supported the introduction • The Mayor published his Air Quality Strategy of a significant number of transformational in December. This aims to cut emissions from public realm schemes. The following schemes London’s transport network by introducing a were completed this year: Orpington town number of measures over the next few years. centre, Herne Hill, Harrow town centre, These include introducing age limits for taxis Greenford town centre, Byng Place in Camden and private hire vehicles, fitting older buses and Carting Lane in

26 Transport for London > Annual Report and Statement of Accounts 2010/2011 Enhance the quality of life for all Londoners 27 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Shipshape in Brixton Contents

When the Empire Windrush set The Mayor, Boris Johnson, said: ‘It is fitting the name Windrush Square remains almost 62 years sail from the Caribbean in 1948 after the first West Indian immigrants arrived on the no one could have known that, Empire Windrush, many choosing to make Lambeth 60 years on, the ship would their home. The positive contribution that this community has made not only to Brixton but the inspire the design of a town whole of London and the UK is unmistakable.’ square in Brixton, south London. The square has been designed to fit in with the The £10m square, now known as Windrush historic character of the Brixton area and was Square, is the third and final part of a project built with materials matching those used in the to improve Brixton town centre. Phases one surrounding buildings. The Sharpeville memorial and two saw upgrades to facilities for plaque, the Tate statue and London Plane tree pedestrians, bus users, drivers and cyclists, in Tate Gardens have been kept to retain the which have improved road safety and access quarter’s distinctive character. to the town centre. The new 3,000 square metre area now includes a Work on the square, a flagship project of the water feature, which sprays a fine mist illuminated Mayor of London’s Great Outdoors programme, by coloured lights, more than 20 new trees and a was completed in 2010 and was carried out by sculpted granite seat. Transport for London in partnership with Lambeth There is also potential for a café with an outside Council, Design for London and the London seating area. Fixed chairs provide a place to sit Development Agency. The area has now been outdoors for local office workers at lunchtime transformed into a community focused space in and for people visiting the Ritzy cinema or Tate Winning look the heart of Brixton, providing a much needed library, which both face on to the Square. ‘Ever since the time of the ancient An international design competition was held venue for local events. Greeks, public spaces have brought to choose the best possible designers for the From consultation with local people in 2005 it together communities to share, play project. An expert panel including Lord Richard It was originally given its name in 1998 to was clear they wanted a space that would be safe and enjoy life. The new Windrush Rogers and the borough police commander commemorate the 50th anniversary of the ship’s and well used, respect the history of the area and Square is a welcome focal point selected award-winning landscape architects voyage and arrival of West Indians in Brixton and add to the life of the town centre. the surrounding area. For many Londoners, the for culture, entertainment and Gross.Max, whose previous work includes the voyage symbolises the beginnings of modern The local police and Lambeth Council were relaxation for the thriving and creative new Potters Field Park next to and British multicultural society. active in the design development to ensure these community in Brixton, reinforcing improvements to the Royal Festival Hall. concerns were addressed. The square’s open Capitalising on the theme, lighting in the London’s popularity as a place to live design means that anyone walking through it can in, visit and invest.’ trees and embedded in pavements and see who is in the area and what they are doing. Boris Johnson, Mayor of London tall structures has been created to look Carefully placed CCTV cameras and improved like windrushes. lighting also enhance the feeling of security.

28 Transport for London > Annual Report and Statement of Accounts 2010/2011 Enhance the quality of life for all Londoners 29 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Pedal power Contents

2010 was London’s ‘year of the east, we are continually looking at ways to improve the operation and provide a smooth cycling’ and the Capital embraced customer experience.’ TfL’s newest transport mode – The most popular docking stations are regularly Barclays Cycle Hire. monitored to ensure supply meets demand. And, following the introduction of casual use, some Around 3.8 million cycle hire trips have been made redistribution has been taking place naturally. and more than 10m km travelled since the scheme launched in July, with thousands taking advantage of the new healthy way to make short trips across central London. Barclays Cycle Hire at a glance Initially open to members only, the scheme • By the end of March 2011, the scheme had launched to ‘casual’ users in December, allowing 114,976 members and almost 3.8 million anyone with a credit or debit card to turn up at a cycle journeys had been made docking station and pay to hire a bike. • Hire bikes are available 24 hours a day. The The scheme continues to change the face of the first 30 minutes of any journey are free once Capital as plans go ahead to extend it eastwards. an access fee has been paid. Around 95 per Superhighways cent of journeys made by members so far ‘One of the best things about Barclays By spring 2012, there will be around 8,000 hire The first two Barclays Cycle Superhighway routes bikes and 14,400 docking points. have been under 30 minutes Cycle Hire has been the number of were introduced in July between Merton and the cyclists who have told me how the bikes • By spring 2012, approximately 2,700 docking City, and Barking and Tower Gateway. They offer Managing demand points in east London and an extra 1,500 in have made a positive change to their clearly marked, direct and continuous cycle routes As a result of the scheme’s huge popularity, central London will be available life as well as their commute. Users say into central London – a viable commuting option a big challenge is to ensure that bikes are they feel healthier, fitter and invigorated for cyclists between Outer and central London. redistributed effectively to meet demand. Serco, • An average journey from Regent’s Park to the scheme’s operator, employs a team of nearly Notting Hill Gate takes 25 minutes; London when they reach their destination.’ Early research suggests there has been an 100 people and more than 20 vehicles to Bridge to Hyde Park, 27 minutes; Tower Hill Kulveer Ranger, the Mayor’s Director overall rise of 70 per cent in cycle journeys maintain and redistribute bikes. to Bond Street, 23 minutes; and Regent’s of Environment & Digital London on the routes, with some sections of the Park to Westminster Abbey, 16 minutes (formerly Transport Advisor) Merton to City route showing increases of Nick Aldworth, the General Manager of Cycle Hire • The largest docking station, at up to 100 per cent. at TfL, said: ‘We’ve introduced a brand new mode Waterloo mainline station, has space for ‘Not only are we seeing more of public transport to London’s streets and we’ve There are plans to launch 12 superhighways in all. 124 bikes. TfL is continuing to look at people cycling to work, but we are been delighted with the public’s enthusiasm and Two more will open in summer 2011, running from ways to improve the service and meet the also actively encouraging cycling for customer feedback. With every journey we learn Bow to Aldgate and Wandsworth to Westminster. demands of an increasingly popular scheme. business trips as a result.’ more about our users and, as we expand out to Carlo Laurenzi, Chief Executive, Wildlife Trust

30 Transport for London > Annual Report and Statement of Accounts 2010/2011 Enhance the quality of life for all Londoners 31 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Improve the safety and security of all Londoners Contents

A wide range of projects and key transport hubs. At three priority hubs – Victoria, Finsbury Park and Stratford – a programmes were introduced or more integrated approach has been adopted, progressed during the year, aimed involving joint tasking and deployment, unified at improving safety and security intelligence and analysis, and priority setting on the transport network and on • Average-speed cameras were installed on the A13 in a trial to reduce the number of speed- the Capital’s streets. related collisions on this busy road Initiatives included: • The campaign to highlight the dangers to • A Safer Travel at Night programme, combining cyclists of travelling too close to heavy vehicles education and enforcement, saw cab-related continued, as part of the Mayor’s Cycle Safety sexual offences and use of bogus cabs fall to Action Plan their lowest levels since 2003. More than 1,300 • Safety on the road, particularly in relation drivers were arrested for touting or other illegal to the growing numbers of cyclists, is an cab activity important feature of the Freight Operator • Fare evasion levels fell on TfL services in Recognition Scheme. Nearly 60,000 response to intelligence-led deployments of commercial vehicles are now registered with Revenue Protection Inspectors at ‘hotspot’ the scheme, which recognises and rewards locations. A new campaign was launched to best practice by operators tackle fare evasion by reminding the travelling • Better lighting, more CCTV and Help points public that plainclothes inspectors operate on the transport network, and improvements across the network to the public realm were among the measures • Further measures to tackle cycle theft and introduced during the year to help reduce criminal damage were introduced. These opportunities for crime and antisocial behaviour included establishing the TfL-funded • The 2001-2010 London Road Safety Plan has Metropolitan Police Safer Transport Cycle Task been completed, delivering casualty reductions Force, free cycle-marking events across London in all target areas and achieving a 57 per cent cut and crime prevention advice in the number of collisions resulting in people • Working with the Metropolitan Police and being killed or seriously injured in London British Transport Police, TfL introduced a compared to the 1994-1998 average programme to improve collaboration at

32 Transport for London > Annual Report and Statement of Accounts 2010/2011 Improve the safety and security of all Londoners 33 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Safety first Contents

When Boris Johnson became upgrade, which has included more use of CCTV on trains and premises and staffed stations. There Mayor of London he pledged to have been significant reductions in robberies and make public transport safer. drug-related offences. Eighty-four per cent of passengers now feel safe at stations, compared This pledge remains high on his and TfL’s agenda, with 79 per cent a year ago – a result of the TfL but already the results speak for themselves. policy of always having staff on platforms while a Figures from the British Transport Police (BTP) service is running. and Metropolitan Police (MPS) show that crime Launched in February, ‘The Right Direction’, the continued to fall on TfL’s transport services Mayor’s strategy for improving transport safety in 2010/11. and security in London, sets out the key activities Crime levels on the transport system are at their TfL and its partners are undertaking to further lowest in more than six years despite passenger reduce crime, antisocial behaviour and fear of numbers being at an all-time high. Over the past crime on the transport system. year, crime has fallen by 7.3 per cent on the Tube and DLR networks (1,064 fewer offences) and by four per cent on the bus network (1,002 fewer offences) – building on significant reductions in recent years. In fact the crime rate per million passenger journeys for the bus network was 10.5 for 2010/11 – half the Protecting frontline staff level experienced in 2005/06. Following the success of London Underground’s These are impressive results that reflect the Workplace Violence Unit (WVU) in protecting its Caught on camera Footage from CCTV cameras on the Tube network efforts of TfL and its partners. TfL’s investment in staff from assaults, an equivalent was set up in TfL’s extensive CCTV network plays an important is not only able to be viewed and monitored locally transport policing provided for more than 2,500 2009 for bus operational staff. role in targeting crime and disorder on the by a specific station but can also be accessed uniformed officers in the Police Safer Transport remotely by the Network Operations Centre at They are partnership units with staff from transport system. It includes cameras on all Command in 2010/11. London Underground HQ and by the BTP. TfL and the police, and they support the of London’s 8,500 buses, more than 12,000 throughout the Tube network, and more than ‘It’s not rocket science,’ says Deputy Mayor for investigation and prosecution of assaults on all BTP Chief Superintendent Mark Newton said: 2,000 on London Overground. Policing Kit Malthouse. ‘Boris’s recruitment of 440 operational staff. ‘CCTV is absolutely vital to our investigation additional police officers to manage bus hubs has of crime on the Tube and DLR network. Good- The WVU has handled 228 cases of assaults They are used by officers for surveillance, resulted in 2,000 fewer crimes.’ quality images allow us to identify suspects and on bus staff since 1 April 2010. By the end of identification, deterrence and reassurance, and they provide the evidence vital to securing follow their movements throughout the system, London Overground passengers, meanwhile, February 2011, 51 cases had been heard at court convictions and bringing offenders ultimately helping to bring about convictions and are now seeing the results of a two-year £1.4bn and there was a 100 per cent conviction rate. to justice. justice for victims.’

34 Transport for London > Annual Report and Statement of Accounts 2010/2011 Improve the safety and security of all Londoners 35 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Look out for your mates Contents

TfL’s latest campaign to improve ‘It is wonderful that these influential stars feel just as strongly and have donated their support road safety among teenagers by contributing to this important road safety gained valuable ‘vocal backing’ campaign,’ Ben Plowden, Director of Better Routes when chart-topping London and Places at TfL, said. singers Tinie Tempah, Eliza As well as working with pop artists, TfL placed thought-provoking stencils in areas popular with Doolittle and Tinchy Stryder young people, such as skate parks. The stencils lent their support. came with the strapline ‘Think! Look out for your mates’. Teens are the most vulnerable age group when it comes to road collisions in the Capital. It’s at this With agreement from local councils, the stencils age, of course, that young people start travelling were placed in areas of high teenage footfall on their own and spending more time with friends. over the summer and removed at the end of the campaign. Reflecting TfL’s strong position on Nearly every day a teenager is killed or seriously graffiti, ‘reverse graffiti’ was used – a process in injured on London’s roads, which is why these which the image is created by water blasting the stars – role models to many young people – concrete with a high-pressure jet hose to ‘clean’ were enlisted to help get the safety message the stencil outline. out to them. TfL’s teen road safety campaign has now been A video clip featuring the artists was posted running for 10 years. During this time the number online warning teens to look out for their mates of teens killed or seriously injured has been and not let their friendship die on the road. Clips reduced by nearly 55 per cent. were also posted on Facebook and on the stars’ own websites. In fact, TfL and the boroughs met the Government’s 2010 targets for reducing the Through these channels TfL was able to reach number of children killed or seriously injured, thousands of teenagers across London, generating as well as the total number of people killed or more than 1,000 views a week. seriously injured, three years early. London’s own The stars were chosen as key influential figures more stringent target of a 60 per cent reduction in ‘This is a fantastic campaign. I really ‘It may not be cool and it may not be for London’s teenagers. They all volunteered their the number of children aged 15 and younger killed hope that my contribution will help it very exciting, but the issue of road safety time for free although it took up to a year to track or seriously injured on our roads was also met. reach more teens across the Capital.’ is very serious. I hope that all London them all down and get time in their busy diaries. But the fight to reduce road casualties goes on. Tinie Tempah teens listen up and look out for their friends as a result of this campaign.’ Eliza Doolittle

36 Transport for London > Annual Report and Statement of Accounts 2010/2011 Improve the safety and security of all Londoners 37 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Improve transport opportunities for all Londoners Contents

Work continued on a range of and enabled refinements to be incorporated into final design. The mock-up went on display projects to improve transport to the general public in the London Transport opportunities for all Londoners. Museum, Covent Garden, in February 2011. WrightBus, the manufacturer, is finalising the • Planning permission was granted for London’s first engineering test vehicle cable car service across the Thames. Providing a quick, direct transport link between • The integration of fares collection systems Peninsula and the O2 and Royal Victoria Docks and ticketing across London’s public transport and the ExCeL centre, the service is expected to continues. This includes Oyster zonal fares on carry up to 2,500 passengers an hour all suburban rail services and river services. More than 1.5 million National Rail journeys are now • Platform humps are being installed on the made each week using Oyster pay as you go Victoria line to provide level access between the platform and train, and they will also be provided • Work continues to update the Countdown real- on the Circle, District, Hammersmith & City and time information system. In autumn 2011, the Metropolitan lines in conjunction with new trains project will provide bus arrival time information for all 19,000 bus stops through the internet and • PA systems and visual information systems SMS. The existing 2,000 signs at bus stops will have been improved at Tube stations across the be replaced by 2,500 new signs in 2012 network. Electronic service update boards are now at 96 per cent of stations • TfL continued to invest in the Dial-a-Ride door to door bus service for Londoners who, through • During 2010/11, Southfields, Kingsbury and permanent or long-term disability, are unable to King’s Cross St. Pancras were made more access mainstream public transport. A further accessible with the addition of lifts. , 39 bespoke low-floor minibuses entered the Farringdon and Blackfriars stations are due to fleet during the year, replacing older vehicles become step-free during 2011 and contributing to more than 1.3 million trips in • The New Bus for London, due to launch in 2010/11, the highest yearly total since the service 2012, will include a step-free gangway on the began in the 1980s lower deck from the front to the back, to allow • TfL’s Travel Mentoring service provided training easy access for mobility-impaired people and support to enable disabled Londoners to and passengers with buggies. There will be a gain the necessary knowledge and confidence to wheelchair bay directly opposite the ramped use all of London’s mainstream public transport centre door. A full-size mock-up of the new modes and National Rail services. Nearly 8,000 bus was scrutinised by a range of mobility escorted trips were completed during the year groups from November 2010 to January 2011

38 Transport for London > Annual Report and Statement of Accounts 2010/2011 Improve transport opportunities for all Londoners 39 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Transforming lines and lives Contents

Thanks to the £1bn East London changes, including travel into Zone 1 at a cost of £5*. The trip on London Overground takes 35 rail route, tens of thousands minutes (plus a short walk) and costs £2.20*, and more people are now enjoying passengers do not need to enter Zone 1 (*based extra travel options for work, on 2010 fares). school, college and leisure, A fleet of 20 new air-conditioned trains offer more comfortable journeys and a greater sense of as well as faster and cheaper safety, with clear sightlines through the carriages rail connections. and comprehensive CCTV coverage. The line reopened in May as part of London The scale of the East London line project Overground’s radical improvements to rail was enormous: connections in the east and south of the city. • In just two-and-a-half years, 2.1km of old It runs from Dalston Junction in the north via the Underground track was upgraded and 3.5km of City and Docklands, to New Cross, Crystal Palace new track was built between Whitechapel and and West Croydon in the south. Dalston Junction The reopening means that an orbital rail route • A flyover and maintenance depot were built around the Capital is almost complete. In 2012, at New Cross Gate, two new bridges were the final part of the link will connect Clapham constructed, and a Victorian viaduct was Junction to Surrey Quays. refurbished. Four new stations were built and 14 were refurbished to include upgraded safety Around 100,000 passengers a day are expected features and improved passenger information to use the service in its first year. This is forecast to rise to 120,000 a day by 2016 in step with the • Throughout the project, TfL has recycled around expected population increase. 93 per cent of construction and demolition waste, rather than send it to landfill The culture line The line is already making a significant impact on ‘Not since the Jubilee line was the area, reconnecting previously isolated areas and Quicker, cheaper journeys The new East London route is one of the reasons the Geffrye Museum is carrying out a £13m extended over 10 years ago have communities. Local estate agents have reported a Following the opening of the East London we seen such a transformational rise in enquiries about property available near the rail route, journey times have improved. From redevelopment. The Museum is just two minutes’ transport project.’ route. House prices have also increased, particularly Dalston Junction it takes just 47 minutes to walk from the new Hoxton Overground station. in the New Cross and New Cross Gate areas, by travel to West Croydon and 37 minutes to During the first three to four months following the Peter Hendy, Commissioner, TfL around 20 per cent in the past two years. Crystal Palace. From Shoreditch High Street route’s opening, 22 per cent of visitors used the line it’s a 16 minute ride to Brockley, 19 minutes to to travel there, and visitor numbers are expected to Before the line opened, the journey for passengers Honor Oak Park, 22 minutes to Forest Hill and increase by 25 per cent by 2015. The redevelopment travelling from West Croydon to Whitechapel 24 minutes to Sydenham. includes a new entrance, additional space for would have taken around 50 minutes, with four collections, a library and conference centre.

40 Transport for London > Annual Report and Statement of Accounts 2010/2011 Improve transport opportunities for all Londoners 41 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Reduce transport’s contribution to climate change and improve its resilience Contents

Efforts to lessen the impact Act 2008, which gives the Government power to direct public bodies to report on how they of the transport network on will address the risks of climate change to their the environment continued assets and services during the year as TfL worked • The New Bus for London and build specification to support targets set by the for new train rolling stock includes adaptation measures to control high summer temperatures Mayor, including a 60 per cent • Flood risk assessments have been carried out 2 reduction in carbon dioxide (CO ) this year which will enable upgrade work to take emissions by 2025. place in summer 2011 to reduce the likelihood of track flooding Among the highlights: • Crossrail has completed flood risk modelling • Membership of London’s car clubs continued this year for 2100 to establish flood design to grow. It now stands at more than 133,000 levels. Measures to mitigate flood risk have members – 88 per cent of total UK membership. been identified. These include raising tunnel Car clubs offer pay-as-you-go access to vehicles entry and exit levels, raising track and building without the ownership costs flood gates if necessary • With financial support from TfL, London’s • All new trains being rolled out on the Tube boroughs increased the number of car club bays network have regenerative braking. The system in the Capital by 705 during the year, bringing the recycles the energy lost during the braking total to 2,597 motion and uses it to power the trains • London Underground is looking at ways to • As part of its commitment to the Mayor’s source decentralised and renewable energy. climate change mitigation strategy, TfL has New procurement processes are being set up purchased six Toyota plug-in hybrid Prius cars so LU can work with energy companies under and four Mitsubishi I-MiEV electric cars this the Government’s Feed in Tariff – a scheme year. These vehicles were part-funded through that pays individuals and organisations for the DfT Low Carbon Vehicle Procurement producing electricity Programme. The TfL Electric Vehicle delivery • Following a review of climate change risks, TfL team is actively working with the GLA group submitted a report to Government in January to increase the number of electric vehicles complying with the Adaptation Reporting Power in the fleet (ARP). The ARP is part of the Climate Change

42 Transport for London > Annual Report and Statement of Accounts 2010/2011 Reduce transport’s contribution to climate change and improve its resilience 43 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Clean, green and red all over Contents

TfL’s efforts to minimise CO2 part of an initial trial to assess their reliability, availability and operational performance. The trial emissions were rewarded in July is already helping to advance hybrid technology when London Buses won the and encourage manufacturers to make technical first ever Low Carbon Champion improvements and switch to larger scale production which will bring units cost down. Award for Buses. Results so far suggest significant savings in fuel The Low Carbon Vehicle Partnership acknowledged and CO2 can be made. With financial support that TfL is leading the country in testing and from the Department for Transport’s Green Bus introducing low-carbon buses with greenhouse Fund, the hybrid fleet is scheduled to grow to 300 gas emissions at least 30 per cent lower than buses by the end of 2012. The pace of the roll- conventional diesel buses. out depends on available funds and the cost of hybrids falling as production grows. Buses contribute five per cent of the total transport CO2 emission in London and the Hydrogen hybrids largest share, nearly 40 per cent, of TfL’s own There are five hydrogen fuel-cell buses operating CO2 footprint. The latest bus technology will on the Covent Garden to Tower Hill route RV1 and help meet the Mayor’s goal of a 60 per cent CO2 this will rise to eight by the end of 2011 as part reduction by 2025 compared with 1990 levels. of TfL’s longer-term strategy to find a solution to The right credentials ‘The arrival of these hydrogen, hybrid But it’s not enough just to find and fund greener reducing London’s CO2. Fresh design and accessibility features are among the attractions of the proposed New Bus for fuel-cell buses marks an exciting technology. TfL needs systems that provide both Hydrogen fuel-cell buses produce zero tailpipe London (see page 38). But its environmental new chapter for London Buses as we fuel and operational efficiency. emissions. It is recognised the production credentials have not been forgotten. embrace new technologies.’ Diesel/electric hybrids of hydrogen gas generates emissions but David Brown, former TfL Managing taking account of its manufacture, supply and Predicted fuel consumption equivalent to 10mpg Hybrid buses powered by a conventional diesel Director for Surface Transport consumption by vehicles in service, overall means this diesel-electric hybrid will: engine and electric motor typically reduce fuel emissions are still lower than conventional diesel consumption and CO2 emissions by up to a third • Be 40 per cent more efficient than conventional ‘Having a bus route running entirely on counterparts. The hydrogen industry is working compared to conventional diesel buses. They diesel double-deckers hydrogen gives us a fantastic flagship towards generating hydrogen from greener also produce fewer pollutants such as oxides fleet to demonstrate the massive technologies which will further reduce overall of nitrogen. TfL’s current bus network produces • Be 15 per cent more efficient than other hybrid benefits of this exciting fuel.’ emissions. The latest generation of hydrogen fuel- double-deckers 630,000 tonnes of CO2 and consumes up to 280 cell buses should enable these vehicles to travel Kit Malthouse, Chair of the London million litres of diesel a year. further without refuelling because they incorporate • Produce CO2 emissions of 750g/km per bus Hydrogen Partnership and Deputy There are currently 106 hybrid buses operating hybrid technology and are far more efficient. compared with 1,200g/km for conventional Mayor of London for policing in London. This includes 56 hybrids which were diesel counterparts • Cost around the same as other hybrids when in full production

44 Transport for London > Annual Report and Statement of Accounts 2010/2011 Reduce transport’s contribution to climate change and improve its resilience 45 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: Plug in, power up… go! Contents

Nearly a quarter of pure or hybrid capital of Europe. According to HSBC, the global electric vehicle market could be worth £440bn by electric vehicles in the UK are 2020 with the EU the biggest market. registered in London and TfL is The Government’s Spending Review secured driving the revolution forward £400m to invest in promotion and development with a Capital-wide network of of ultra-low-emission vehicle technologies, and all major vehicle manufacturers have either launched charge points. or plan to launch more affordable, practical The Source London scheme, launching in May electric cars in the next 18 months. 2011, will provide at least 1,300 charge points by To encourage drivers to take the green option, the 2013. Able to support many thousands of electric Government is also offering grants of 25 per cent vehicles, the network will be accessed via a off the purchase price (up to £5,000) for those membership scheme for a £100 annual fee. wanting to buy pure electric or plug-in hybrid cars. TfL has worked with London’s boroughs and private partners, including retailers, energy companies and vehicle manufacturers, to develop the scheme. A dedicated website (www.sourcelondon.net) provides information The benefits Funding about electric vehicles as well as details of where • Electric vehicles are 40 per cent less ‘When Source London is complete, the TfL leads a consortium of private and public and how to access the points. CO intensive than equivalent petrol or Capital will have more charge points than partners which has won £9.3m in funding from 2 diesel vehicles petrol stations. The ongoing support of the Government’s Plugged in Places Programme Source London aims to change the way the Government and increased private to establish Source London. This will be people drive. With charge points available • They do not emit any air pollutants such sector involvement shows how key supplemented by investment from private and in supermarkets, car parks and on-street, as particulate matter or oxides of nitrogen. investing in electric vehicles remains.’ public sector partners. Siemens will run the IT electric cars will become a genuine option. In Existing road traffic is a major source of Nick Fairholme, Interim Director and back office functions for Source London free addition, electric vehicles benefit from a 100 these pollutants of charge for three years, significantly reducing per cent discount from the Congestion Charge, of Congestion Charging and • Lower maintenance and potentially cheaper Traffic Enforcement TfL’s costs and providing a boost to electric potentially saving drivers over £2,200 a year. vehicles in the Capital. running costs as petrol prices are expected ‘Through the development of Source Around 90 per cent of car trips in the Capital are to rise less than 10km – well within the range of the London, we are seeking to create the electric vehicle models currently available – so • Discounted parking rates in some of the fertile conditions for electric vehicles London is ideally placed to become an electric Capital’s boroughs to flourish to make our city the electric vehicle world leader. The Mayor’s target is to get • No Congestion Charge for registered driving capital of Europe.’ 100,000 electric cars on to London’s roads as electric vehicles Boris Johnson, Mayor of London soon as possible and make it the electric vehicle

46 Transport for London > Annual Report and Statement of Accounts 2010/2011 Reduce transport’s contribution to climate change and improve its resilience 47 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Support the delivery of the London 2012 Olympic and Paralympic Games and its legacy Contents

Work continued on a range • The Olympic Route Network (ORN) and the Paralympic Route Network (PRN) will provide of projects during the year to specially managed routes, giving priority to the support the delivery of the Olympic ‘family’ – an expected 24,000 athletes, London 2012 Olympic and 5,000 officials and 28,000 media professionals – ensuring they arrive at events on time Paralympic Games and its legacy: • To manage the ORN and PRN a new Transport • TfL assumed responsibility of key transport Coordination Centre has been set up which will programmes for the Games from the Olympic leave a legacy of improved journey planning and Delivery Authority including 2012 Games coordination across London, as well as new Travel Demand Management, the Olympic and traffic signals and junction upgrades. After the Paralympic Route Networks and Road Freight 2012 Games, this new infrastructure will provide Management programmes the opportunity to improve traffic management, giving Londoners more reliable journey times • Up to three million additional trips are expected in London on the busiest day of the Games. • The extension of the East London line between TfL’s Travel Demand Management programme Dalston Junction and West Croydon, which will ensure the smooth running of London and opened ahead of schedule on 23 May, has UK transport networks by influencing people’s improved passenger options on London travel behaviour Overground (see page 40) • Walking and cycling infrastructure is being • Stratford station has been completely improved ahead of the Games to encourage redeveloped to make it more spacious, with new more people to walk and cycle after the ticket halls and entrances, new subways and events. Plans include a number of Better concourses, lifts and new platforms Street projects and improving access to cycle greenways. Cycle hire is likely to play an important role in helping people get around London during the 2012 Games

48 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support the delivery of the London 2012 Olympic and Paralympic Games and its legacy 49 Support economic Enhance the quality of life Improve the safety and security Improve transport Reduce transport’s Support the delivery of the development and for all Londoners of all Londoners opportunities for all Londoners contribution to climate change London 2012 Olympic and population growth and improve its resilience Paralympic Games and its legacy

Spotlight: 2012 and beyond Contents

The DLR is one of London’s great The upgrades on the Bank and Lewisham line in April, and the Stratford and Lewisham line in transport success stories. Now November, have seen passengers benefit from 50 reaching Bank, Beckton, Lewisham, per cent extra capacity during the morning peak. The addition of a third carriage on these lines London City Airport and Woolwich means more than 1,000 additional passengers Arsenal, it has expanded faster can travel every hour. And recent figures suggest than any other UK railway. It is service reliability on the network has reached an impressive 97.4 per cent. on track for more success as the Jonathon Fox, DLR Director, said ‘This is an Capital prepares to host the exciting time for DLR, with passenger numbers up 2012 Games. by 5.1 per cent from last year and service reliability continuing to climb. Our recent successes are TfL, with support from the London Organising showing that we are on track to provide high Committee of the Olympic Games and Olympic quality services during the 2012 Olympic and Delivery Authority, has already overseen increases Paralympic Games.’ in capacity and construction of new lines. The delivery of 55 new railcars in 2010 is a further The completion of work on the Beckton line – boost to the network – one which will provide a expected in May – will see the whole of the network valuable infrastructure legacy beyond the Games. three-car compatible in time for the Games.

Extra capacity Legacy ‘Increasing capacity on the Docklands ‘As the Olympics approaches, the The DLR will be the focal point for transport in Regeneration is a key legacy of the Games: Light Railway is part of the Mayor’s DLR has struck gold with a huge 50 East London during the 2012 Games. It will serve In Lower Lea Valley, east London, the DLR continued commitment to improve the per cent increase in capacity – the four key competition venues – ExCeL, Olympic will bring new jobs, homes, shops and other Park, Royal Artillery Barracks and Greenwich – and leisure facilities. Other parts of London will journeys of those using public transport perfect example of the Olympic legacy carry around seven million people. Therefore also benefit from employment opportunities across the city. We are improving the already delivering real improvements increased capacity on the network is vital. through direct connections to the Royal Docks service for all Londoners who use the for Londoners. This £325m boost is and Woolwich Arsenal. New passengers to the DLR on a regular basis and with the not only integral to preparations for A £325m two-and-a-half-year upgrade programme DLR will also benefit from an environmentally forthcoming Games we are determined ferrying spectators to the 2012 Games, has taken place across the DLR network to allow friendly alternative to the car, while the provision longer trains to run. This includes: extended to make sure everyone – visitors and but it will also benefit the many of intermediate stations between Stratford and platforms, upgraded junctions and track, a residents – is able to travel to events thousands of people who use this Canning Town will better serve existing and remodelled Tower Gateway station and new South quickly and comfortably.’ popular and handy railway.’ future communities. Quay station. Kulveer Ranger, the Mayor of Boris Johnson, Mayor of London London’s Environment Advisor (formerly Transport Advisor)

50 Transport for London > Annual Report and Statement of Accounts 2010/2011 Support the delivery of the London 2012 Olympic and Paralympic Games and its legacy 51 Statement of Accounts Contents

Explanatory Foreword and Financial Review 54 Statement of Responsibilities for the Accounts 62 Independent Auditor’s Report 63 Group Comprehensive Income and Expenditure Statement 66 Group Balance Sheet 67 Group Movement in Reserves Statement 68 Group Statement of Cash Flows 69 Corporation Comprehensive Income and Expenditure Statement 70 Corporation Balance Sheet 71 Corporation Movement in Reserves Statement 72 Corporation Statement of Cash Flows 73 Accounting Policies 74 Notes to the Financial Statements 87

52 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 53 Explanatory Foreword and Financial Review Contents

2010/11 was an important year for TfL. Major reflected a year-on-year increase in passenger on National Rail services in London is continuing to Expenditure on London Rail increased by five per projects were progressed to improve and extend journeys of four per cent and above inflation fares increase strongly since its extension to all National cent following the opening of the East London line. services across London. These included continued increases. On the bus network, a smaller increase Rail services in Greater London in January 2010. Crossrail construction works, the completion of in passenger journeys together with fare increases The Train Operating Companies’ revenue share Expenditure breakdown (2010/11) the London Overground extension to Highbury & resulted in an increase in fares revenue of more from PAYG rose from £3m per week at the end 3% Islington, and the roll out of the Barclays Cycle than 10.6 per cent to £1,257m. of 2009/10 to just under £5m per week at the end 2% Hire scheme. The PPP contractor Tube Lines was of 2010/11. brought back in-house, in order to provide greater Revenue breakdown (2010/11) flexibility in the way the Tube is upgraded. A London Overground’s revenue of £61m for last 28% Government Spending Review took place, resulting 6% year was up 78 per cent compared to 2009/10. This 4% in a revised TfL funding settlement. growth was due to the opening of the East London 4% Line in May 2010 and its extension to Highbury & As a response to this, TfL increased its efficiency Islington in February 2011, as well as strong year on 8% and cost savings programme, resulting in forecast year growth on the rest of the Overground network. savings of £7.6bn to 2017/18. As part of this 67% programme, TfL has commenced a fundamental Total fares revenue on the DLR for 2010/11 was review of its operating and management structure 45% £89m compared with £76m for 2009/10, an through Project Horizon. increase of 17 per cent. Running costs Staff costs Congestion Charging revenue fell from £313m Highlights 33% PPP maintenance, leasing and PFI changes to £287m, largely as a result of the closure During 2010/11, passenger demand across the Financial assistance TfL network continued the recovery seen towards of the Western Extension zone on 24 December the end of 2009/10. Passenger journeys on the Fares revenue (London Underground) 2010 following consultation, the introduction of Underground increased by 3.9 per cent to 1.1bn. Fares revenue (bus network) Auto Pay on 4 January 2011, and changes in the Expenditure breakdown by business area (£m) Service demand on the bus network rose by 1.3 per Congestion Charging scheme pricing structure for the remaining Congestion Rent and commercial advertising Charging zone. cent to 2.3bn passenger journeys for the year, and 2792 the Docklands Light Railway (DLR) carried 78 million Fares revenue (Rail) 2733 passengers in the year, a rise of 13.5 per cent. Other income Operational expenditure 2290 Operating expenditure on the Underground 2050 Fares decisions are taken annually by the Mayor. Total revenue by business unit (£m) reduced by 10.5 per cent to £2,050m. Aside from Fares increased at RPI plus two per cent in January ongoing efficiencies, Underground’s expenditure 2011, in line with the Business Plan assumption. This 1941 benefited from the release of certain provisions 974 1795 resulted in an eight per cent increase in fares revenue 1687 and claims held against Tube Lines prior to its 753 1560 to £3,193m. Gross expenditure before write off of acquisition. Bus network costs increased overall by 309 273 goodwill decreased by 4.6 per cent to £5,825m. only £11m to £1,848m. Bus subsidy has decreased by nearly a quarter over the last three years from LU Surface Rail Other The level of capital works being undertaken during £563m in 2008/09 to £428m. This has been Transport 2010/11 remained high, albeit fractionally below achieved through a combination of accepting the 196 142 98 2009/10 levels. Capital expenditure during the 60 need for fares to make a greater contribution to 2010/11 2009/10 year was £2,906m, a 0.7 per cent reduction on the LU Surface Rail Other the cost of providing the service, such that fares previous year. Transport now represent three quarters of the cost, and by continuing to ensure good value and cost control. TfL continued to support borough schemes that Revenue 2010/11 2009/10 This reduction has been made whilst achieving improve the quality, safety, accessibility and TfL’s primary source of revenue remains fares on record service levels and passenger journeys. sustainability of the local travelling environment. The the London Underground and bus network. This Over the course of 2010/11, the use of Oyster pay overall funding package for 2010/11 included £145m represents 82.3 per cent of all revenue generated as you go stabilised on TfL services at around 38 There was a decrease in expenditure on Congestion provided directly to the boroughs through the Local in 2010/11. Fares revenue on London Underground per cent of all journeys on the Underground and Charging mainly due to savings arising from the Implementation plan programme. Other financial was £1,758m, 7.5 per cent up on 2009/10. This 20 per cent on buses. However, pay as you go use closure of the Western Extension of the scheme. assistance included payments related to Taxicard.

54 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 55 Explanatory Foreword and Financial Review (continued) Contents

Interest and finance charges On the Underground, introduction of new trains on new mezzanine entrance at the station opened for Rail expenditure includes DLR projects such as Total financing and investment expenditure for the Victoria line has continued, with the last of the customer service in March 2011. the Stratford International extension, capacity the year was £813m, an increase of £52m on the old 1967 stock trains expected to be withdrawn enhancement works to upgrade the railway to previous year. The main reason for this increase was from passenger service in the summer of 2011. Following the acquisition of Tube Lines, LU enable three car operation, and infrastructure the higher expected interest cost of the defined Construction of a new purpose built Victoria was able to take much closer control of the improvements. Other projects included London benefit obligation of the pension scheme. This Line service control centre at Osborne House in late-running upgrade of the Jubilee line, originally Overground improvements for the North London was as a result of higher liabilities at the start of Northumberland Park Depot was completed during due for completion in December 2009. After line and the commencement of works on phase the year, partially offset by applying a lower rate of the year. further successful testing and trial operations over two of the East London line project. interest. Christmas, the new Transmission Based Train Control The Underground’s first air-conditioned trains are in signalling system was used in passenger service During the year, £662m was spent on preparatory Financing and investment income was £408m, an service on the Metropolitan line. By the end of the on weekdays for the first time from 29 December works for the Crossrail project, and the early increase of £123m on the previous year. This was year, three were running on the routes north of Baker 2010, between Dollis Hill and Stratford. This period stages of main construction. A further £213m was largely due to an increase in the expected return on Street, and shortly afterwards the type made its first also saw trains running in service in Automatic Train capitalised in respect of the acquisition of land pension scheme assets as a result of both higher run in passenger service between Harrow-on-the-Hill Operation on the line for the first time. Despite and property interests, taking the total spend on assets at the start of the year and a change in mix and Aldgate; further off-peak runs are taking place some well-publicised incidents, reliability of the the project since Royal Assent on 22 July 2008 to of pension scheme assets. before the route is included for timetabled service. new systems improved steadily through to the end £1.8bn, including land and property. At the end of As the year ended, the first 7-car version of the of the year. Work on extending the systems to the the financial year, the sponsors and HM Treasury’s Balance sheet new stock was delivered; this train will be used for remaining northern section of the line is continuing Major Project Review Group conducted their final Net assets increased by £2,417m between infrastructure testing and commissioning prior to with a view to introducing the first enhanced planned review of the project, awarding Crossrail 31 March 2010 and 31 March 2011, reflecting the introduction into passenger service on the Circle and post-upgrade timetable in summer 2011. a positive project review notice. The passing of decrease in the pension defined benefit obligation Hammersmith & City line, in 2012. this review (‘Review Point Four’) means that the of £665m, as calculated under IAS19, and capital As well as progress with the major line independent Crossrail Board now has authority grants recognised in the year. Another major element of the programme to upgrades, the process of ongoing renewal of the to award contracts without recourse to the upgrade the sub-surface lines is resignalling, and Underground’s core assets continued with the governance arrangements of either sponsor and is a Long-term assets increased significantly, as a result shortly after the end of the year LU announced replacement during the year of 23 km of track, significant vote of confidence in Crossrail’s delivery of the continuing high levels of capital expenditure selection of the preferred bidder for the signalling refurbishment or replacement of 18 escalators strategy and organisational capabilities. particularly in respect of the Crossrail project and upgrade contract. This contract provides for no and lifts, and the completion of 13 station line upgrade projects in London Underground. weekend closures simply for signalling installation refurbishments and modernisations. Financing and testing work. There will still be a need for TfL raised further funds during the year and Capital expenditure weekend closures to upgrade track and platforms, In Surface Transport, £249m was spent on expanded its sources of borrowing to support its Capital expenditure for the year was £2,906m. but these will be contained in much smaller capital works, including cycling initiatives such Investment Programme. geographical areas and will not mean closures to as the Barclays Cycle Hire scheme and the first Capital expenditure by business area (£m) full lines as has been experienced during previous of the Cycle Superhighways, the capital renewal Set out below is a table summarising movements upgrade work on other lines. works programme on the Transport for London in borrowing during the year. In addition to the Road Network (TLRN), safety and environmental 1529 1495 sources of financing in the table below, other 1360 Work on the upgrades of Victoria and Tottenham improvements on the A406, including replacing sources of financing include the PFIs (see also Court Road stations continued, and the contract the Hanger Lane bridges and the creation of a Notes 21 and 22 to the accounts). 1053 for the £300m redevelopment of Bond Street dual-carriageway at Bounds Green. There was also station was let during the year. In September 2010, expenditure on safety improvements to bridges King’s Cross St Pancras became the 62nd step-free and tunnels such as the major project to refurbish station on the Underground when a lift providing the Blackwall Tunnel northbound, as well as step-free access to the Northern line platforms traffic signal modernisation and improvements to 279 202 was commissioned. At Stratford station, a new associated communications infrastructure. 45 63 platform has been opened, allowing train operators to open doors on both sides of westbound Central Capital expenditure of £1,053m was incurred LU Surface Rail Other line trains providing more direct access to the by Rail, of which £178m relates to London Rail Transport Jubilee line, DLR services and the station exit. The and £875m to the Crossrail project. The London 2010/11 2009/10

56 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 57 Explanatory Foreword and Financial Review (continued) Contents

Movement in long-term borrowing £m The latest full actuarial valuation of the TfL Pension Key risks Treasury operates on a centralised, non-speculative Fund was carried out as at 31 March 2009. The TfL’s operations and ongoing Investment risk basis. Its purpose is to identify and mitigate Opening borrowing 4,118 2009 valuation showed a deficit on the Public residual treasury-related financial risks inherent to at 1 April 2010 Programme are subject to a number of risks. Sector Section for funding purposes of £1,331m, the Group’s business operations. European 200 The second instalment of a and as a result of this the employers agreed a These include: Investment Bank total facility of £1bn drawn revised Schedule of Contributions with the TfL has considered the implications of its overall loan – Crossrail down over six years. The • The future performance of the economy and its Pension Fund. asset and liability management, with analysis loan has an average fixed effect on fares and secondary income. Weaker interest rate of 4.9 per cent. continuing on its overall exposure to inflation and economic growth could have a significant impact Repayment of the loan is interest rates as they affect its commercial markets Prospects and outlook on passenger demand. A further risk would be between 2021 and 2058 (passenger levels, fare revenues and costs) and in its In March 2011, TfL approved its updated Business a sustained period of high inflation or marked Commercial paper 433 Borrowings with different financial activities (financial costs and investment Plan for the years to 2014/15. This replaces the increase in the cost of borrowing maturities ranging between October 2009 plan, and covers a shorter period to returns on cash balances). two and four months with • The £7.6bn of efficiencies and other cost savings a weighted average interest reflect the revised Government settlement. rate of 0.71 per cent that are assumed in the Business Plan. This The results of this analysis led to TfL seeking and includes significant underlying initiatives involving obtaining more diverse and flexible borrowing Tube Lines 1,592 Acquired debt Financing of the Business Plan is from: organisational change and restructuring sources while maintaining a conservative • Government grants Closing borrowing 6,343 investment strategy. at 31 March 2011 • Delivery of milestones set out in TfL’s Spending • TfL Prudential borrowing Review settlement to cost and time • Fares income The primary treasury-related financial risks faced The borrowing limit for the Corporation set by the • TfL’s plans to sell property and other assets. by the Group are counterparty credit, liquidity and Mayor for 2010/11 was £7.301bn. • Congestion Charge income These are dependent on market conditions interest rate movements. These are the focus of and may have legislative requirements which • Secondary income such as advertising treasury policies, as set out below: would be subject to securing appropriate Cash and short-term investments • Third party funding for specific projects Total cash, cash equivalents and deposits greater Parliamentary time Counterparty credit than three months but less than 365 days held by • Sales of property and other assets • Unexpected events or acts of terrorism that could The Group’s exposure to credit-related losses i.e. the Group at 31 March 2011 amounted to £2,067m. have a larger impact than the reserves included in non-performance by counterparties on financial The average yield from TfL’s cash investments Passengers the Business Plan to cover such attacks instruments, is mitigated by setting a minimum for 2010/11 was 0.52 per cent. This reflects the The investment in the Business Plan is designed to required credit rating and applying financial limits conservative nature of TfL’s investment strategy support London’s projected growth - population TfL will manage these and other risks by regularly based on credit ratings. For 2010/11, TfL followed and historically low interest rates. Most of the growth of up to 1.25 million and employment reviewing the assumptions underpinning the a conservative investment strategy, investing only cash reflects usable reserves earmarked to fund growth of up to 0.75 million by 2031. This means Business Plan and, where appropriate, adopting with UK Government (via T-Bills and the Debt TfL’s future Investment Programme, including the there will be around three million extra trips a day risk-specific mitigation strategies such as financial Management Office (DMO), the four main UK Crossrail project. in the Capital by 2031. investments to limit TfL’s exposure. clearing banks and AAA rated money market funds. The amounts that can be invested with the DMO Pensions When complete, Crossrail will deliver a 10 per Treasury risk management were not limited, while amounts invested with the As at 31 March 2011, the majority of TfL’s cent increase in rail-based network capacity in The Board approves prudent treasury policies UK clearing banks were based on the bank’s credit employees are members of the Public Sector London and the Tube upgrades will provide more that comply both with the principles of the CIPFA rating and any Government support. The minimum Section of the TfL Pension Fund. Over the past than a 30 per cent increase in capacity, catering Prudential Code and investment guidance issued by rating was A+/A1. Credit ratings are obtained from year, the fair value of the assets of this Section has for anticipated demand growth and addressing the Secretary of State under Section 15 (1) (a) of the the three main ratings agencies and are kept under increased by £550m. There is a small reduction in current overcrowding. Local Government Act 2003. constant review. the actuarial value of future liabilities of £52m, and as a consequence the deficit of pension scheme Fares policy Senior management directly control day-to-day Funding and liquidity assets over future liabilities for the TfL Pension The Business Plan continues to assume that fares treasury operations. The Finance and Policy To ensure continuity of affordable funding, debt Fund has reduced by £603m. will rise at two per cent above RPI in each year of Committee (a committee of the TfL Board) is the maturities are spread over a range of dates that the Plan period. Fares decisions are taken annually primary forum for discussing the annual treasury broadly equate to the lives of assets purchased In addition, at 31 March 2011 the Group had future by the Mayor. The fares package for 2011 was set investment strategy, policy matters and for with the proceeds of debt. The maturity profile of liabilities under unfunded pension arrangements of on this basis so that, on average, bus and Tube submitting proposals to the Board. debt outstanding at 31 March 2011 is set £53m, an increase of £2m from 2010. fares rose by 6.8 per cent.

58 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 59 Explanatory Foreword and Financial Review (continued) Contents out in Note 33 to the accounts. Due to the size • The TfL Group, which is made up of the The Statement of Accounts comprises: shown in the movement in reserves statement line and long-term nature of future commitments, Corporation and its subsidiaries as set out in • The Group and Corporation Comprehensive ‘Adjustments between accounting basis and funding significant cash balances are held to mitigate Note 14 Income and Expenditure Statements, balance basis under regulations’. the risk of any future restriction of access to sheets, cash flow statements and movement in funds. During the year 2010/11, TfL established Under the GLA Act 1999, the Corporation is treated reserves statements. The cash flow statement a Commercial Paper programme which has given as a Local Authority for accounting purposes and The cash flow statement shows the changes in TfL access to liquid short term borrowings at the Statement of Accounts, which includes the • The statement of accounting policies cash and cash equivalents of TfL during the financial favourable interest rates driven by its strong individual financial statements of the Corporation, • Statement of responsibilities for the accounts year. The statement shows how TfL generates and credit ratings. has been prepared in accordance with the Code • Notes to the Group and Corporation uses cash and cash equivalents by classifying cash of Practice on Local Authority Accounting in the financial statements flows as derived from operating, investing and United Kingdom 2010/11 (the Code), which is based Interest rates financing activities. The amount of net cash flows TfL has approved parameters of a minimum of on International Financial Reporting Standards. Within the Statement of Accounts references to arising from operating activities is a key indicator 50 per cent fixed-rate on existing and forecast the ‘Corporation’ relate to the transactions, assets of the extent to which the operations of TfL are debt. The proportion of fixed-rate debt borrowings In 2007, the Government announced that the UK and liabilities of TfL. References to the ‘Group’ funded by way of fares income and grant income. at the year end was 93 per cent; the remaining Public Sector would make the transition to IFRS relate to the accounts of TfL and its subsidiaries. Investing activities represent the extent to which based financial reporting, which was seen as best seven per cent was Commercial Paper debt which, cash outflows have been made for resources practice and would allow better international although it has fixed rates of interest, in practice which are intended to contribute to TfL’s future comparisons to be made. As a result of this, all local Purposes of major schedules within behaves more like floating rate debt if used on a service delivery. revolving basis. authorities are making the transition to reporting the financial statements under IFRS for the year ended 31 March 2011. Movement in reserves statement During the year 2010/11, TfL entered into a Comprehensive Income and This statement shows the movement in the year programme of forward starting interest rate swaps TfL has prepared these financial statements Expenditure Statement on the different reserves held by TfL, analysed for the purposes of risk mitigation. This programme in accordance with the IFRS-based Code. This This statement shows both the revenue received into usable reserves and other reserves. The has enabled TfL to lock in future borrowing costs has also necessitated a restatement of prior and the costs incurred in the year of providing Surplus or (Deficit) on the Provision of Services at favourable rates and remove some of the year comparative financial information. Further services, in accordance with generally accepted line shows the true economic cost of providing uncertainty that was present in the Business Plan. details of the adjustments made to the financial accounting practices. statements can be found in note 38. TfL’s services, more details of which are shown in the Comprehensive Income and Expenditure Cash investments at the year end reflected rates for The balance sheet Statement. These are different from the statutory maturities ranging from overnight to 183 days, with TfL’s subsidiaries are subject to the accounting The balance sheet shows the value as at the amounts required to be charged to the General a weighted average maturity of 45 days. requirements of the Companies Act 2006 and balance sheet date of the assets and liabilities Fund Balance. The Net Increase/ Decrease separate statutory accounts are prepared for each recognised by TfL. The net assets of TfL (assets less subsidiary and for the Transport Trading Limited before Transfers to Earmarked Reserves line Accounting statements liabilities) are matched by the reserves held by TfL. shows the statutory General Fund Balance TfL is a statutory corporation established by group. These accounts are also prepared under Reserves are reported in two categories. The first International Financial Reporting Standards. The before any discretionary transfers to or from section 154 of the Greater London Authority Act category of reserves is usable reserves, being those earmarked reserves. 1999 (GLA Act 1999). It is a functional body of the financial statements for the TfL Group, which reserves that TfL may use to provide services, Greater London Authority (GLA) and reports to the consolidate the accounts of the Corporation and its subject to the need to maintain a prudent level of Mayor of London. subsidiaries on the basis set out in the statement of reserves. The second category of reserves is those accounting policies (paragraph c), are also presented that TfL is not able to use to provide services. The legal structure is complex in comparison to alongside the financial statements This category of reserves includes reserves that that of most local authorities and comprises: of the Corporation. hold unrealised gains and losses (for example the • The Corporation, which is made up of London Revaluation Reserve), where amounts would only Streets, the Public Carriage Office and the become available to provide services if the assets corporate centre which, for legal and accounting were sold, and reserves that hold timing differences purposes, constitutes TfL

60 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 61 Statement of Responsibilities for the Accounts Independent Auditor’s Report Contents

The Corporation is required to: We have audited the financial statements of Scope of the audit of the • Make arrangements for the proper administration Transport for London and the Transport for financial statements of its financial affairs and to secure that one London Group (‘the Group’) for the year ended 31 An audit involves obtaining evidence about of its officers (its Chief Finance Officer) has March 2011 which comprise the Corporation and the amounts and disclosures in the financial responsibility for the administration of Group Comprehensive Income and Expenditure statements sufficient to give reasonable assurance those affairs; Statements, the Corporation and Group Balance that the financial statements are free from material Sheets, the Corporation and Group Movement in misstatement, whether caused by fraud or error. • Manage its affairs to secure economic, efficient Reserves Statements, the Corporation and Group This includes an assessment of: whether the and effective use of resources and safeguard Cash Flow Statements and the related notes, accounting policies are appropriate to Transport its assets; as set out on pages 87 to 183. These financial for London’s circumstances and have been • Approve the Statement of Accounts. statements have been prepared under applicable consistently applied and adequately disclosed; the law and the accounting policies set out in the reasonableness of significant accounting estimates The Chief Finance Officer is responsible for the Statement of Accounting Policies. made by the Chief Finance Officer; and the overall preparation of the Statement of Accounts for the presentation of the financial statements. In Corporation and the Group in accordance with This report is made solely to Transport for London addition, we read all the financial and non-financial proper practices as set out in the CIPFA/LASAAC in accordance with Part II of the Audit Commission information in the annual report to identify Code of Practice on Local Authority Accounting in Act 1998. Our audit work has been undertaken so material inconsistencies with the audited financial the United Kingdom (‘the Code’). that we might state to Transport for London those statements. If we become aware of any apparent matters we are required to state to them in an material misstatements or inconsistencies we In preparing this Statement of Accounts, auditor’s report and for no other purpose. To the consider the implications for our report. the Chief Finance Officer has: fullest extent permitted by law, we do not accept or assume responsibility to anyone other than • Selected suitable accounting policies and then Opinion on financial statements Transport for London for our audit work, for this applied them consistently; In our opinion the financial statements: report or for the opinions we have formed. • Made judgements and estimates that were • give a true and fair view of the Group and the reasonable and prudent; Respective responsibilities of the Corporation as at 31 March 2011 and of the Group’s and the Corporation’s expenditure and • Complied with the Code; Chief Finance Officer and auditor income for the year then ended; and As explained more fully in the Statement of • Kept proper accounting records which were up to Responsibilities set out on page 62, the Chief • have been properly prepared in accordance date; and Finance Officer is responsible for the preparation with the CIPFA/LASAAC Code of Practice • Taken reasonable steps for the prevention and of the Statement of Accounts which give a true on Local Authority Accounting in the United detection of fraud and other irregularities. and fair view. Our responsibility is to audit, and Kingdom 2010/11. express an opinion on, the financial statements in I certify that the Statement of Accounts gives a accordance with applicable law and International true and fair view of the financial position of the Standards on Auditing (UK and Ireland). Those Corporation and Group at the accounting date and standards require us to comply with the Auditing of the income and expenditure for the year ended Practices Board’s Ethical Standards for Auditors. 31 March.

Stephen Critchley Chief Finance Officer 29 June 2011

62 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 63 Independent Auditor’s Report (continued) Contents

Matters on which we report having regard to relevant criteria specified by the Conclusion by exception Audit Commission. On the basis of our work, having regard to the We have nothing to report in respect of the guidance on the specified criteria published by following matters, where the Code of Audit We report if significant matters have come to the Audit Commission in October 2010, we Practice 2010 for Local Government Bodies our attention which prevent us from concluding are satisfied that, in all significant respects, the requires us to report to you if: that the Corporation has put in place proper Corporation put in place proper arrangements to arrangements for securing economy, efficiency secure economy, efficiency and effectiveness in its • the governance statement does not reflect and effectiveness in its use of resources. We are use of resources for the year ended 31 March 2011. compliance with ‘Delivering Good Governance in not required to consider, nor have we considered, Local Government: a Framework’ published by whether all aspects of the Corporation’s CIPFA/SOLACE in June 2007; or Certificate arrangements for securing economy, efficiency We certify that we have completed the audit • any matters have been reported in the and effectiveness in its use of resources are of the financial statements of Transport for public interest under section 8 of the Audit operating effectively. London Group and Corporation in accordance Commission Act 1998 in the course of, or at with the requirements of the Audit Commission the end of, the audit; or Basis of conclusion Act 1998 and the Code of Audit Practice 2010 for • any audit recommendations have been We have undertaken our work in accordance Local Government Bodies issued by the designated under section 11 of the Audit with the Code of Audit Practice 2010 for Local Audit Commission. Commission Act; or Government Bodies, having regard to the guidance on the specified criteria, published by the Audit • we have exercised special powers. Commission in October 2010, as to whether the corporation has proper arrangements for: W Southwood, for and on behalf Conclusion on the Corporation’s • securing financial resilience; and of KPMG LLP, Statutory Auditor arrangements for securing economy, efficiency and effectiveness in the use • challenging how it secures economy, efficiency Chartered Accountants and effectiveness. of resources 15 Canada Square Canary Wharf The Audit Commission has determined these London Corporation’s responsibilities two criteria as those necessary for us to consider The Corporation is responsible for putting in E14 5GL under the Code of Audit Practice 2010 for Local 3 August 2011 place proper arrangements to secure economy, Government Bodies in satisfying ourselves efficiency and effectiveness in its use of resources, whether the Corporation has put in place proper to ensure proper stewardship and governance, and arrangements for securing economy, efficiency and to review regularly the adequacy and effectiveness effectiveness in its use of resources for the year of these arrangements. ended 31 March 2011.

Auditor’s responsibilities We planned and performed our work in accordance We are required under Section 5 of the Audit with the Code of Audit Practice 2010 for Local Commission Act 1998 to satisfy ourselves that the Government Bodies. Based on our risk assessment, Corporation has made proper arrangements for we undertook such work as we considered securing economy, efficiency and effectiveness in necessary to form a view on whether, in all its use of resources. The Code of Audit Practice significant respects, the Corporation had put in 2010 for Local Government Bodies issued by the place proper arrangements to secure economy, Audit Commission requires us to report to you our efficiency and effectiveness in its use of resources. conclusion relating to proper arrangements,

64 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 65 Group Comprehensive Income and Expenditure Statement Group Balance Sheet Contents

Restated Restated Restated 2011 2010 31 March 31 March 1 April Year ended 31 March Note £m £m 2011 2010 2009 Highways and Transport Services Note £m £m £m Gross income 1 3,884.2 3,595.0 Long-term assets Gross expenditure 3 (6,066.6) (6,108.0) Intangible assets 11 139.6 162.3 51.8 Net cost of services 2 (2,182.4) (2,513.0) Property, plant and equipment 12 23,404.7 21,651.7 19,585.3 Other operating expenditure 6 (321.8) (105.2) Investment properties 13 294.3 294.5 355.5 Financing and investment income 7 408.0 285.3 Derivative financial instruments 15 4.9 - - Financing and investment expenditure 8 (813.0) (761.0) Long-term debtors 17 6.9 39.5 3.6 Non specific grant income 9 4,672.6 3,337.8 23,850.4 22,148.0 19,996.2 Surplus on the provision of services before tax 2 1,763.4 243.9 Current assets Taxation income 10 1.3 - Inventories 16 35.6 18.3 20.2 Surplus on the provision of services after tax 1,764.7 243.9 Short-term debtors 17 600.4 607.1 475.5 Other comprehensive income and expenditure: Current tax assets 32 14.5 - - Surplus on the revaluation of property, plant and equipment 0.9 2.4 Short-term investments 18 2,012.7 1,472.5 1,967.8 Movement in the fair value of derivative statements 4.4 - Cash and cash equivalents 19 54.1 36.9 34.1 Actuarial gain/ (loss) on defined benefit pension schemes 24 647.2 (1,001.9) 2,717.3 2,134.8 2,497.6 652.5 (999.5) Current liabilities Total comprehensive income and expenditure 2,417.2 (755.6) Short-term creditors 20 (1,956.8) (1,720.0) (1,788.9) Short-term borrowings and overdrafts 21 (494.2) - - Short-term finance lease liabilities 22 (69.2) (398.0) (356.4) Short-term provisions 23 (254.1) (294.9) (46.3) (2,774.3) (2,412.9) (2,191.6) Long-term liabilities Long-term creditors 20 (55.6) (38.1) (37.0) Long-term borrowings 21 (5,892.5) (4,117.8) (3,017.6) Long-term finance lease liabilities 22 (1,349.8) (2,957.8) (2,905.5) Derivative financial instruments 15 (0.5) - - Long-term provisions 23 (165.7) (270.5) (107.0) Retirement benefit obligation 24 (1,620.1) (2,193.7) (1,187.5) (9,084.2) (9,577.9) (7,254.6) Net assets 14,709.2 12,292.0 13,047.6 Reserves Usable reserves 1,870.0 1,041.5 1,318.9 Unusable reserves 25 12,839.2 11,250.5 11,728.7 Total reserves 14,709.2 12,292.0 13,047.6

The notes on pages 74 to 183 form part of these financial statements. These financial statements were approved by the Board on 29 June 2011 and signed on its behalf by: Boris Johnson, Chair of TfL

66 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 67 Group Movement in Reserves Statement Group Statement of Cash Flows Contents

Restated Capital grants General Earmarked unapplied Usable Unusable Total 2011 2010 Note fund reserves account reserves reserves reserves Year ended 31 March £m £m Note £m £m £m £m £m £m Net surplus on the provision of services after tax 1,764.7 243.9 At 1 April 2009 (restated) 177.2 1,141.7 - 1,318.9 11,728.7 13,047.6 Adjustments to net surplus after tax for non-cash movements 29a (1,760.1) (988.1) Movement in reserves Net cash flows from operating activities 4.6 (744.2) during 2009/10 Investing activities 29b 47.9 308.8 Surplus/(deficit) on the provision (448.2) - - (448.2) 692.1 243.9 Financing activities 29c (35.3) 438.2 of services after tax Net increase in cash and cash equivalents in the year 17.2 2.8 Other comprehensive income - - - - (999.5) (999.5) and expenditure Cash and cash equivalents at the start of the year 36.9 34.1 Total comprehensive income (448.2) - - (448.2) (307.4) (755.6) Cash and cash equivalents at the end of the year 54.1 36.9 and expenditure Adjustments between accounting basis 26 (1.2) - 172.0 170.8 (170.8) - and funding basis under regulations Net increase/(decrease) before (449.4) - 172.0 (277.4) (478.2) (755.6) transfers from earmarked reserves Transfers from earmarked reserves 435.7 (435.7) - - - - Increase/(decrease) in 2009/10 (13.7) (435.7) 172.0 (277.4) (478.2) (755.6) Balance at 31 March 2010 (restated) 163.5 706.0 172.0 1,041.5 11,250.5 12,292.0 Movement in reserves during 2010/11 Surplus on the provision 1,140.3 - - 1,140.3 624.4 1,764.7 of services after tax Other comprehensive income - - - - 652.5 652.5 and expenditure Total comprehensive income 1,140.3 - - 1,140.3 1,276.9 2,417.2 and expenditure Adjustments between accounting basis 26 (1,337.0) - 1,025.2 (311.8) 311.8 - and funding basis under regulations Net increase/(decrease) before (196.7) - 1,025.2 828.5 1,588.7 2,417.2 transfers from earmarked reserves Transfers from earmarked reserves 187.6 (187.6) - - - - Increase/(decrease) in 2010/11 (9.1) (187.6) 1,025.2 828.5 1,588.7 2,417.2 Balance at 31 March 2011 154.4 518.4 1,197.2 1,870.0 12,839.2 14,709.2

68 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 69 Corporation Comprehensive Income and Expenditure Statement Corporation Balance Sheet Contents

Restated Restated Restated 2011 2010 31 March 31 March 1 April Year ended 31 March Note £m £m 2011 2010 2009 Note £m £m £m Highways and Transport Services Long-term assets Gross income 382.2 447.2 Intangible assets 11 89.3 133.7 43.8 Gross expenditure 3 (1,023.7) (1,106.1) Property, plant and equipment 12 3,370.3 3,129.9 2,743.9 Net cost of services (641.5) (658.9) Investment properties 13 13.8 18.1 76.4 Other operating expenditure 6 (39.2) (2.8) Long-term investments 14 472.5 22.5 22.5 Financing and investment income 7 147.8 113.5 Long-term debtors 17 5,285.3 3,095.8 2,184.9 Financing and investment expenditure 8 (274.1) (182.3) 9,231.2 6,400.0 5,071.5 Non specific grant income 9 4,553.6 3,187.2 Current assets Non specific grant funding of subsidiaries (2,606.3) (2,904.9) Inventories 16 3.2 2.3 2.7 Surplus/ (deficit) on the provision of services 1,140.3 (448.2) Short-term debtors 17 331.7 333.4 210.4 Other comprehensive income and expenditure Short-term investments 18 1,978.9 1,427.8 1,925.8 Actuarial gain/ (loss) on defined benefit pension schemes 24 16.6 (31.2) Cash and cash equivalents 19 - 7.0 11.2 Total comprehensive income and expenditure 1,156.9 (479.4) 2,313.8 1,770.5 2,150.1 Current liabilities Short-term creditors 20 (514.9) (387.5) (480.5) Short-term borrowings and overdrafts 21 (495.7) - - Short-term finance lease liabilities 22 (7.4) (6.8) (5.7) Short-term provisions 23 (224.3) (265.8) (29.1) (1,242.3) (660.1) (515.3) Long-term liabilities Long-term creditors 20 (23.7) (10.8) (10.8) Long-term borrowings 21 (5,848.1) (4,117.8) (3,017.6) Long-term finance lease liabilities 22 (194.9) (202.4) (209.1) Long-term provisions 23 (100.8) (180.8) (24.6) Retirement benefit obligation 24 (54.4) (74.7) (40.9) (6,221.9) (4,586.5) (3,303.0) Net assets 4,080.8 2,923.9 3,403.3 Reserves Usable reserves 1,870.0 1,041.5 1,318.9 Unusable reserves 25 2,210.8 1,882.4 2,084.4 Total Reserves 4,080.8 2,923.9 3,403.3

The notes on pages 74 to 183 form part of these financial statements. These financial statements were approved by the Board on 29 June 2011 and signed on its behalf by: Boris Johnson, Chair of TfL

70 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 71 Corporation Movement in Reserves Statement Corporation Statement of Cash Flows Contents

Capital Restated grants 2011 2010 General Earmarked unapplied Usable Unusable Total Year ended 31 March Note £m £m fund reserves account reserves reserves reserves Net surplus/(deficit) on the provision of services 1,140.3 (448.2) Note £m £m £m £m £m £m Adjustments to net (deficit) for non cash movements 29a (1,056.2) 21.0 At 1 April 2009 (restated) 177.2 1,141.7 - 1,318.9 2,084.4 3,404.3 Net cash flows from operating activities 84.1 (427.2) Movement in reserves during 2009/10 Investing activities 29b (2,043.4) (497.4) (Deficit) on the provision (448.2) - - (448.2) - (448.2) Financing activities 29c 1,950.8 920.4 of services Net decrease in cash and cash equivalents in the year (8.5) (4.2) Other comprehensive income - - - - (31.2) (31.2) Cash and cash equivalents at the start of the year 7.0 11.2 and expenditure Cash and cash equivalents/ (overdrafts) at the end of the year (1.5) 7.0 Total comprehensive income (448.2) - - (448.2) (31.2) (479.4) and expenditure Adjustments between accounting basis 26 (1.2) - 172.0 170.8 (170.8) - and funding basis under regulations Net increase/(decrease) before transfers (449.4) - 172.0 (277.4) (202.0) (479.4) from earmarked reserves Transfers from earmarked reserves 435.7 (435.7) - - - - Increase/(decrease) in 2009/10 (13.7) (435.7) 172.0 (277.4) (202.0) (479.4) Balance at 31 March 2010 (restated) 163.5 706.0 172.0 1,041.5 1,882.4 2,923.9 Movement in reserves during 2010/11 Surplus on the provision 1,140.3 - - 1,140.3 - 1,140.3 of services Other comprehensive income - - - - 16.6 16.6 and expenditure Total comprehensive income 1,140.3 - - 1,140.3 16.6 1,156.9 and expenditure Adjustments between accounting basis 26 (1,337.0) - 1,025.2 (311.8) 311.8 - and funding basis under regulations Net increase/(decrease) before transfers (196.7) - 1,025.2 828.5 328.4 1,156.9 from earmarked reserves Transfers from earmarked reserves 187.6 (187.6) - - - - Increase/(decrease) in 2010/11 (9.1) (187.6) 1,025.2 828.5 328.4 1,156.9 Balance at 31 March 2011 154.4 518.4 1,197.2 1,870.0 2,210.8 4,080.8

72 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 73 Accounting Policies Contents a) Code of practice The Group has opted to take the following and the Comprehensive Income and Expenditure e) New standards and interpretations TfL is required to prepare an annual Statement of exemptions in accordance with IFRS 1 First time Statements and Statement of Cash Flows for not yet adopted Accounts by the Accounts and Audit Regulations adoption of IFRS (‘IFRS 1’): the year ended 31 March 2010 which have been The provisions of FRS 30 Heritage Assets have been 2011 (the 2011 Regulations), which those restated to comply with the Code. incorporated into the 2011/12 Code. Adoption Regulations require to be prepared in accordance • The Group has opted not to apply IFRS 3 Business of FRS 30 will result in a change in accounting with proper accounting practices. The Statement of Combinations (‘IFRS 3’) to business combinations The accounting convention adopted in the policy in 2011/12. Heritage assets are those Accounts have been prepared in accordance with that occurred before 1 April 2009; Statement of Accounts is principally historical cost, assets that are intended to be preserved in trust the Code of Practice on Local Authority Accounting modified by the revaluation of certain categories of for future generations because of their cultural, in the United Kingdom 2010/11 (the Code), • The Group has applied IFRIC 4 Determining non-current assets and financial instruments. environmental or historical associations. These developed by the Chartered Institute of Public whether an arrangement contains a lease (‘IFRIC provisions will therefore apply to the collection at Finance and Accountancy (CIPFA) and the Local 4’) from 1 April 2009 and therefore determined Where items are sufficiently significant by virtue of the London Transport Museum. Heritage assets Authority (Scotland) Accounts Advisory Committee whether or not an arrangement contains a lease their size or nature, they are disclosed separately in will be carried at valuation where possible and (LASAAC) Code Board under the oversight of the based on the facts and circumstances existing at the financial statements in order to aid the reader’s additional disclosures will be required. It is not Financial Reporting Advisory Board. The Code that date; understanding of the Corporation’s and Group’s anticipated that the valuation of TfL’s heritage constitutes proper accounting practice for the financial performance. assets will be material to the Corporation’s or purpose of the 2011 Regulations. • The Group has elected to use the previous Group’s balance sheets. UK-GAAP valuation for all property, plant and c) Basis of preparation of group accounts The Code for 2010/11 is based on International equipment and investment properties; and The Code requires local authorities with, in f) Discontinued operations Financial Reporting Standards adopted by the EU aggregate, material interests in subsidiary and A discontinued operation is a component of the • The Group has opted to use the date of transition (‘Adopted IFRS’) and requires that local authorities associated companies and joint ventures, to Group’s business that represents a separate major to IFRS (1 April 2009) as the effective date for prepare their financial statements in accordance prepare group financial statements. line of business or geographical area of operations applying IAS 23 Borrowing costs (‘IAS 23’). with the International Accounting Standards Board that has been disposed of or is held for sale, or ‘Framework for the Preparation and Presentation of The Group financial statements presented with is a subsidiary acquired exclusively with a view to In 2009/10, the accounts were prepared in Financial Statements’ as interpreted by the Code. the Corporation’s financial statements consolidate resale. Classification as a discontinued operation accordance with the Code of Practice on Local the individual financial statements of TfL and its occurs upon disposal or when the operation Authority Accounting in the United Kingdom 2009 The Code is compliant with Adopted IFRS subsidiary undertakings. meets the criteria to be classified as held for (the SORP). The SORP for 2009/10 was based on except for: sale, if earlier. When an operation is classified UK GAAP. The acquisition method of accounting has as a discontinued operation, the comparative Capital grants and contributions been adopted for acquisitions or disposals Comprehensive Income and Expenditure Capital grants and contributions are recognised b) Basis of accounting of subsidiary undertakings. Under this method, Statement is re-presented as if the operation immediately in the Comprehensive Income and The adoption of the 2010/11 IFRS-based Code has the identifiable assets and liabilities of an acquired had been discontinued from the start of the Expenditure Statement once there is reasonable required the Corporation and the Group to restate entity are recorded at their fair values at the date comparative period. assurance that all conditions relating to those its 2009/10 accounts. An explanation of how the of acquisition. Costs of acquisition are expensed grants have been met. Under Adopted IFRS capital transition to the Code has affected the reported in line with IFRS 3 (revised) Business combinations. g) Uses of estimates and judgements grants and contributions are recorded as deferred Balance sheet and Comprehensive Income and The results of subsidiary undertakings acquired The preparation of financial statements in income and recognised in the Comprehensive Expenditure Statement of the Corporation and the or disposed of are included in the Group conformity with the Code requires the use of Income and Expenditure Statement over the useful Group is provided in note 38. Comprehensive Income and Expenditure certain critical accounting estimates. It also requires life of the asset. Statement from the date of acquisition until the management to exercise judgement in applying the The accounts are made up to 31 March. The date of disposal. Group’s accounting policies. The areas involving a IAS 24 Related Party Disclosures Corporation is a single service authority and all higher degree of judgement or complexity, or areas The Code has been prepared based on IAS 24 expenditure is attributable to the provision of d) Going concern where assumptions or estimates are significant to Related Party Disclosures as revised in December highways, roads and transport services. The financial statements have been prepared on a the financial statements are disclosed below: 2003. In November 2009 a new version of going concern basis as it is considered by the Board IAS 24 was issued which becomes effective for The accounting policies set out below have been that TfL will continue in operational existence for entities with accounting periods commencing after applied consistently to all periods presented the foreseeable future and meet its liabilities as 1 January 2011 with early adoption permitted. in these financial statements and in preparing they fall due for payment. The Group has taken the option to early adopt the the Balance Sheets and Movements in Reserves revised standard. Statements at 1 April 2009 and 31 March 2010

74 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 75 Accounting Policies (continued) Contents

Post-retirement benefits Useful economic life of property, plant line basis over the period of validity of the ticket The operating segments of the Group and their The pension costs and defined benefit plan and equipment or travel card. Revenue received in advance and principal activities are as follows: obligations of the Group’s defined benefit plans are When determining the useful economic life of not recognised in the Comprehensive Income and calculated on the basis of a range of assumptions, property, plant and equipment, judgement needs to Expenditure Statement is recorded in the balance • London Underground (including former Metronet including the discount rate, inflation rate, salary be exercised in estimating the length of time that sheet and held within current liabilities- receipts businesses) – Provision of passenger rail services growth and mortality. Differences arising as a the assets will be operational. in advance for travel cards, bus passes and Oyster and refurbishment and maintenance of certain result of actual experience differing from the cards. Oyster pay as you go revenue is recognised parts of the rail network assumptions, or future changes in the assumptions Leases on usage and one day travel cards and single • Tube Lines – Refurbishment and maintenance will be reflected in subsequent periods. A small In assessing whether a lease is an operating lease or tickets are recognised on the day of purchase. certain parts of the rail network (Jubilee, change in assumptions can have a significant impact a finance lease, judgement needs to be exercised Northern and Piccadilly lines) on the valuation of the defined benefit obligations. in determining whether or not substantially all Revenue in respect of free and reduced fare More details are given in note 24. the risks and rewards of ownership of the leased travel for the elderly and disabled. • London Rail – Provision of passenger rail services asset are held by the Group. Given that finance Revenue from the London Borough Councils in • Surface Transport – Provision of surface transport, Derivative financial instruments lease obligations are recognised as liabilities, and respect of free travel for the elderly and disabled is and maintenance of London’s roads The Group manages the interest rate risk on operating lease obligations are not, this can have a recognised on a straight line basis over the financial • Corporate items – Central functions borrowings by taking out interest rate swap significant effect on the reported financial position year to which the settlement relates. derivative products. In making its assessment and of the Group. judgements, the Group assesses the effectiveness Congestion charging j) Grants and other funding of the interest rate swap and changes in its fair value. Provisions The standard daily congestion charge, including The main source of grant is Transport Grant, The interest rate profile of the Group’s financial Judgement and estimation techniques are those paying through Auto-pay, is recognised as which is non-specific in that it is applied both assets and liabilities is disclosed in note 33. employed in the calculation of the best estimate income on the day the eligible vehicle enters the to maintaining services and to fund capital of the amount required to settle obligations, congestion charge areas. Prepayments by fleets expenditure. Other key funding streams include Determining whether an arrangement including determining how likely it is that of vehicles are deferred to the balance sheet and specific capital grants from the Department for contains a lease expenditure will be required by the Group. This can released on a daily basis as the vehicles enter the Transport and the Greater London Authority for When determining whether an arrangement be very complex, especially when there is a wide congestion charge area. the Crossrail project and grants for transport contains a lease, as required by IFRIC 4, judgement range of possible outcomes. More details are given related works in preparation for the London 2012 needs to be exercised in determining whether the in note 23. Income from penalty charge notices is recognised, Olympic and Paralympic Games from the Olympic arrangement conveys the right to use an asset. net of a provision, for penalty charge notices as Delivery Authority. Given that this could result in additional finance Investment property they become due. Each increase in charge results in leases being recognised on the Balance Sheet Investment property, which is held to earn rentals income being recognised in full at that date In the accounts of the Corporation and Group, all this can have a significant effect on the reported and/or capital appreciation, is stated at its fair value non-specific grant is credited to the Comprehensive financial position of the Group. at the balance sheet date. Gains and losses from Commercial advertising Income and Expenditure Statement upon receipt changes in the fair value of investment property Commercial advertising revenue is recognised on an or when there is reasonable assurance that the Classification of investment properties are included in the Comprehensive Income and accruals basis in accordance with the detail of the grant will be received. If a capital grant is received, IAS 40 Investment properties (‘IAS 40’) requires Expenditure Statement for the period in which relevant agreements. but has certain conditions as to when it may be that properties are classified as investment they arise. applied, it will be held, in the first instance, within properties where they are held for the purpose of Rental income the payables section of the balance sheet. Once any relevant conditions have been met, the capital capital appreciation or to earn rentals. The Group h) Revenue recognition Rental income is recognised on a straight line basis owns a number of commercial properties as part over the term of the lease. grant is credited to the Comprehensive Income and Revenue is generated from the provision of travel, Expenditure Statement. of its infrastructure where part of the property is the letting of commercial advertising space and the leased out to third parties. To comply with IAS 40, rental of commercial properties. i) Segmental reporting Where expenditure on fixed PPC is financed either judgement needs to be exercised in determining In accordance with the Code, the Group’s whether these properties should be classified as Revenue is measured after the deduction of value wholly or partly by capital or non-specific grants or operating segments have been determined by other contributions, the amount of the grant investment properties in accordance with IAS 40. added tax (where applicable). identifying the segments whose operating results As investment properties are valued at fair value are reviewed by the Board, when making decisions with movements in the fair value being recorded Fares revenue regarding the allocation of resources and for the in the Comprehensive Income and Expenditure Revenue from annual or periodic tickets and assessment of performance. Statement this could have a significant effect on travel cards is recognised in the Comprehensive the financial performance of the Group. Income and Expenditure Statement on a straight

76 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 77 Accounting Policies (continued) Contents applied is credited to the Capital Adjustment Deferred tax is not recognised for the following line basis over the estimated useful lives of commencement date for capitalisation is on or Account through the Movements in Reserves temporary differences: the initial recognition intangible assets, from the date that they are after 1 April 2009. Statement. Amounts not utilised in the year are of assets or liabilities in a transaction that is available for use, unless such lives are indefinite. credited to the Capital Grants Unapplied Account, not a business combination and that affects When parts of an item of property, plant and a usable reserve, for application in future periods. neither accounting nor taxable profit or loss, and The useful lives and amortisation methods for equipment have different useful lives, they differences relating to investments in subsidiaries software costs are three to five years and straight are accounted for as separate items (major Amounts of non-specific grants not used in the and jointly controlled entities to the extent that line respectively. components) of property, plant and equipment. year are credited to the General Fund balance or it is probable that they will not reverse in the to an Earmarked Reserve for specific use in future foreseeable future. In addition, deferred tax is not n) Property, plant and equipment Gains and losses on disposal of an item of periods, where appropriate. recognised for taxable temporary differences arising property, plant and equipment are determined on the initial recognition of goodwill. Recognition and measurement by comparing the proceeds from disposal with k) Financing and investment income Infrastructure consists of roads, tunnels, viaducts, the carrying amount of property, plant and and expenses Deferred tax is measured at the tax rates that are bridges, stations, track, signalling, bus stations and equipment, and are recognised net within other Financing and investment income comprises expected to be applied to temporary differences stands, properties attached to infrastructure which gains and losses in the Comprehensive Income and interest income on funds invested and expected when they reverse, based on the laws that have are not separable from infrastructure, and properties Expenditure Statement. return on pension assets. Interest income is been enacted or substantively enacted by the attached to infrastructure which are used to facilitate recognised in the Comprehensive Income and reporting date. the service provision but are limited in use by Depreciation Expenditure Statement as it accrues using the operational constraints. Some of these properties Depreciation is calculated on the depreciable effective interest rate method. Deferred tax assets and liabilities are disclosed net generate revenues which are considered to be amount, which is the cost of an asset, or other to the extent that they relate to taxes levied by the incidental to the Group’s activities. amount substituted for cost, less its residual value. Financing and investment costs comprise same authority and the Group has the right of set off. interest expense on borrowings, finance lease Infrastructure, plant and equipment, assets under Depreciation is recognised in the Comprehensive liabilities and expected cost of pension scheme A deferred tax asset is recognised for unused construction and rolling stock are measured at cost Income and Expenditure Statement on a straight- defined benefit obligation. Borrowing costs that tax losses, tax credits and deductible temporary less accumulated depreciation and accumulated line basis over the estimated useful lives of each are not directly attributable to the acquisition, differences, to the extent that it is probable that impairment losses. part of an item of property, plant and equipment, construction or production of a qualifying asset future taxable profits will be available against since this most closely reflects the expected pattern are recognised in the Comprehensive Income and which they can be utilised. Deferred tax assets are Office buildings are valued at fair value (open of consumption of the future economic benefits Expenditure Statement using the effective interest reviewed at each reporting date and are reduced market value on an existing use basis) by internal embodied in the asset. rate method. to the extent that it is no longer probable that the and external professionally qualified valuers. related tax benefit will be realised. Movements in the fair value of the property are Leased assets are depreciated over the shorter of l) Taxation taken to the revaluation reserve. the lease term and their useful lives. Land is not depreciated. Income tax expense comprises current and deferred m) Intangible assets tax. Current tax and deferred tax are recognised The cost of certain items of property, plant and The estimated useful lives for the current and in the Comprehensive Income and Expenditure Goodwill equipment was determined by reference to a comparative periods are as follows: Statement except to the extent that it relates to Where the cost of a business combination exceeds previous GAAP revaluation. The Group elected to a business combination, or to items recognised the fair values attributable to the net assets apply the optional exemption to use this previous Tunnels and embankments up to 100 years directly in equity or in other comprehensive income. acquired, the resulting goodwill is capitalised and revaluation as deemed cost at 1 April 2009, the tested for impairment at each balance sheet date. date of transition. Bridges and viaducts up to 100 years Track up to 50 years Current tax is the expected tax payable or Goodwill is allocated to income-generating units Road pavement up to 15 years receivable on the taxable profit or loss for the year, for the purpose of impairment testing. Cost includes expenditure that is directly Road foundations up to 50 years using tax rates enacted or substantively enacted attributable to the acquisition of the asset. The Signalling 15 to 40 years at the reporting date, and any adjustment to tax Other intangible assets cost of self-constructed assets includes the cost Stations up to 50 years payable in respect of previous years. Software costs are measured at cost less of materials and direct labour, any other costs accumulated amortisation and accumulated directly attributable to bringing the assets to a Other property 20 to 50 years Rolling stock 30 to 50 years Deferred tax is recognised in respect of temporary impairment losses. working condition for their intended use, the Lifts and escalators 25 to 40 years differences between the carrying amounts of assets costs of dismantling and removing the items and Plant and equipment 3 to 40 years and liabilities for financial reporting purposes and Amortisation is charged to the Comprehensive restoring the site on which they are located, and Computer equipment 3 years the amounts used for taxation purposes. Income and Expenditure Statement on a straight borrowing costs on qualifying assets for which the

78 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 79 Accounting Policies (continued) Contents

Depreciation methods, useful lives and residual For trade receivables this is after an allowance for All finance costs and other borrowing costs are constant periodic rate of interest on the remaining values are reviewed at each financial year-end estimated impairment. The allowance is based recognised in the Comprehensive Income and balance of the liability. and adjusted if appropriate, the effect of such on objective evidence that the Group will not be Expenditure Statement in the period in which they adjustment being prospectively recognised as a able to recover all amounts due, through a review are incurred. Contingent lease payments are accounted for change of estimate. of all accounts and prior experience of collecting by revising the minimum lease payments over outstanding balances. Changes in u) Provisions the remaining term of the lease when the lease o) Investment property the carrying amount of the allowance are Provisions are recognised in the balance sheet when adjustment is confirmed. Investment property is property held either to recognised in the Comprehensive Income and the Group has a present obligation as a result of a earn rental income or for capital appreciation or Expenditure Statement. past event, and it is probable that the Group will Determining whether an arrangement for both, but not for sale in the ordinary course be required to settle that obligation. Provisions are contains a lease of business, use in the supply of services or for The fair value of trade and other receivables is measured at management’s best estimate of the At inception of an arrangement, the Group administrative purposes. estimated as the present value of future cash flows, expenditure required to settle the obligation at the determines whether such an arrangement is or discounted at the market rate of interest at the balance sheet date, and are discounted to present contains a lease. A specific asset is the subject Investment property is measured initially at cost, reporting date. This fair value is determined for value where the effect is material. of a lease if fulfilment of the arrangement is including transaction costs, and subsequently disclosure purposes. dependent on the use of that specified asset. An measured at fair value with any change therein v) Leases (the Group as lessee) arrangement conveys the right to use the asset if recognised in the Comprehensive Income and r) Non-current assets held for sale the arrangement conveys to the Group the right to Expenditure Statement. When the use of a property Non-current assets (and disposal groups Leased assets control the use of the underlying asset. changes such that it is reclassified as property, comprising a group of assets and potentially Leases under which the Group assumes plant and equipment, its fair value at the date some liabilities that an entity intends to dispose substantially all the risks and rewards of ownership At inception or upon reassessment of the of reclassification becomes its cost for of in a single transaction) are classified as held are classified as finance leases. Upon initial arrangement, the Group separates payments subsequent accounting. for sale if their carrying amount will be recovered recognition the leased asset is measured at an and other consideration required by such an principally through sale rather than continuing use, amount equal to the lower of its fair value and the arrangement into those for the lease and those for A mix of internal and external professionally they are available for immediate sale and sale is present value of the minimum lease payments. other elements on the basis of their relative fair qualified valuers is used to measure fair value. highly probable. Subsequent to initial recognition, the asset is values. If the Group concludes for a finance lease accounted for in accordance with the accounting that it is impracticable to separate the payments p) Inventories On initial classification as held for sale, non-current policy applicable to that asset. reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying Inventories consist primarily of fuel, uniforms, assets or disposal groups are measured at the lower asset. Subsequently the liability is reduced as and materials required for the operation and of their previous carrying amount and fair value less Other leases are operating leases and the leased payments are made and an imputed finance charge maintenance of infrastructure. Equipment and costs to sell. No amortisation or depreciation is assets are not recognised in the Group’s on the liability is recognised using the Group’s materials held for use in a capital programme are charged on non-current assets (including those in balance sheet. incremental borrowing rate. accounted for as inventory until they are issued to disposal groups) classified as held for sale. the project, at which stage they become part of Lease payments w) Leases (the Group as lessor) assets under construction. s) Trade and other payables Payments made under operating leases are Amounts due from lessees under finance leases Trade and other payables are recognised initially at recognised in the Comprehensive Income and are recorded as receivables at the amount of the Inventories are stated at cost less a provision for fair value and subsequently at amortised cost using Expenditure Statement on a straight-line basis over Group’s net investment in the leases. Finance lease excess and obsolete inventory. Cost comprises the effective interest rate method. the term of the lease. Lease incentives received direct materials, direct labour costs and those are recognised as an integral part of the total lease income is allocated to accounting periods so as overheads that have been incurred in bringing expense, over the term of the lease. to reflect a constant periodic rate of return on the t) Borrowing costs the inventories to their present location and Group’s net investment outstanding in respect of Borrowing costs directly attributable to the condition. Cost is calculated using the weighted Minimum lease payments made under finance the leases. acquisition, construction or production of qualifying average method. leases are apportioned between the finance assets (those necessarily taking a substantial period expense and the reduction of the outstanding Rental income from operating leases and initial of time to get ready for their intended use) are direct costs are recognised on a straight line basis q) Trade and other receivables liability. The finance expense is allocated to each added to the cost of those assets, until such time period during the lease term so as to produce a over the term of the relevant lease. Trade and other receivables are recognised initially as the assets are ready for their intended use. at fair value and subsequently at amortised cost.

80 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 81 Accounting Policies (continued) Contents x) Private Finance Initiative (‘PFI’) within the ‘Comprehensive Income and z) Employee benefits Unfunded pension schemes transactions and similar contracts Expenditure Statement’. Ex gratia payments are made to certain employees The Code requires the Group to account for Defined benefit plans on retirement in respect of service prior to infrastructure PFI schemes where it controls the The element of the unitary payment that is The majority of the Group’s employees are the establishment of pension funds for those use of the infrastructure and the residual interest allocated as a finance lease rental is applied to members of a number of defined benefit plans, employees. Supplementary payments are also in the infrastructure at the end of the arrangement. meet the annual finance cost and to repay the which provide benefits based on final pensionable made to the pensions of certain employees who TfL therefore recognises PFI assets as items of lease liability over the contract term. pay. The assets of schemes are held separately retired prior to the index linking of pensions. property, plant and equipment together with a from those of the Group. The Group augments the pensions of certain liability to pay for them. The fair values of services Life cycle replacement employees who retire early under voluntary received under the contract are recorded as Components of the asset replaced by the operator On retirement, members of the schemes are paid severance arrangements. These unfunded pension operating expenses. during the contract (‘lifecycle replacement’) are their pensions from a fund which is kept separate defined benefit obligations are provided for in the capitalised where they meet the Group’s criteria for from the Group. The Group makes cash contributions balance sheet. The annual unitary payment is separated into the capital expenditure. They are capitalised at the time to the funds in advance of members’ retirement. following component parts, using appropriate they are provided by the operator and are measured Defined contribution plans estimation techniques where necessary: initially at their fair value. Pension scheme assets are measured using current Some employees are members of defined a) The service charge market bid values. Pension scheme defined benefit contribution plans. A defined contribution plan b) Repayment of the capital Off balance sheet PFI arrangements accounted for obligations are measured using a projected unit is a post-employment benefit plan under which c) The interest element (using the interest rate as operating leases are dealt with as detailed in credit method and discounted at the current an entity pays fixed contributions into a separate implicit in the contract) note w) above. rate of return on a high quality corporate bond entity and will have no legal or constructive of equivalent term and currency to the defined obligation to pay further amounts. Obligations Services received y) Impairment of non-financial assets benefit obligation. for contributions to defined contribution pension The fair value of services received in the year is At each balance sheet date, the Group reviews plans are recognised as an employee benefit recorded under the relevant expenditure headings the carrying amount of those assets that are The difference between the value of the pension expense in the Comprehensive Income and within ‘gross expenditure’. subject to amortisation to determine whether scheme assets and pension scheme defined Expenditure Statement in the periods during which there is an indication that any of those assets has benefit obligations is a surplus or a deficit. A services are rendered by employees. Assets suffered an impairment loss. If any such indication pension scheme surplus is recognised to the Assets are recognised as property, plant and exists, the recoverable amount of the asset is extent that it is recoverable and a pension scheme Other employee benefits equipment or intangible assets when they come estimated in order to determine the extent of any deficit is recognised in full. The movement in the Other short and long-term employee benefits, into use. The assets are measured initially at fair impairment loss. scheme surplus/deficit is split between operating including holiday pay and long service leave, are value in accordance with IAS 17 Leases. charges, finance items and, in the Comprehensive recognised as an expense over the period in which Impairment occurs when an asset’s carrying Income and Expenditure Statement, actuarial gains they accrue. Where the operator enhances assets already value is below its recoverable amount. An asset’s and losses. Generally, amounts are charged to recognised in the Balance Sheet the fair value of the recoverable amount is the higher of its value in use operating expenditure on the basis of the current aa) Reserves enhancement in the carrying value of the asset is and its fair value less costs to sell. service cost of the present employees that are Reserves consist of two elements, usable recognised as an asset. members of the schemes. and unusable. In accordance with the Code, when an asset is Liabilities not held for the purpose of generating cash flows Defined benefit plans – Usable reserves are those that can be applied to A PFI liability is recognised at the same time as the but primarily for service provision, value in use is multi-employer exemption fund expenditure. They are made up of the general assets are recognised. It is measured initially at the the present value of the asset’s remaining service For certain defined benefit schemes, the fund, earmarked reserves, and the capital grants same amount as the fair value of the PFI assets and potential, which can be assumed to be at least equal Corporation and/or the Group is unable to unapplied account. is subsequently measured as a finance lease liability to the cost of replacing that service potential. This is identify its share of the underlying assets and in accordance with IAS 17. the case for the majority of the Group’s assets. defined benefit obligations of the scheme on a Unusable reserves cannot be applied to fund consistent and reasonable basis. As permitted expenditure as they are not cash backed. They An annual finance cost is calculated by applying An impairment review is completed for all assets by the multi-employer exemption in IAS 19 include the capital adjustment account, pension the implicit interest rate in the lease to the on an annual basis and additionally when there is an Employee benefits, these schemes are accounted reserve, the retained earnings reserve in subsidiaries opening lease liability for the year, and is indication that an asset may be impaired. for as defined contribution schemes. The Group’s and the fixed asset revaluation reserve. charged to ‘Financing and Investment Expenditure’ contributions are charged to the Comprehensive Income and Expenditure Statement as incurred.

82 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 83 Accounting Policies (continued) Contents ab) Financial instruments as either ‘fair value through the Comprehensive Cash and cash equivalents recognition in profit or loss depends on the nature Financial assets within the scope of IAS 39 Financial Income and Expenditure Statement’ or available Cash and cash equivalents comprise cash balances of the hedge relationship. Instruments: Recognition and Measurement (‘IAS for sale. Such assets are carried at amortised cost and call deposits with maturity of less than or equal 39’) are classified as: using the effective interest rate method if the time to three months. Cash equivalents are classified as The Group designates certain derivatives as either value of money is significant. Gains and losses loans and receivables financial instruments. hedges of the fair value of recognised assets or • Financial assets at fair value through are recognised in the Comprehensive Income liabilities or firm commitments (fair value hedges), the Comprehensive Income and and Expenditure Statement when the loans and Financial assets – other investments hedges of highly probable forecast transactions Expenditure Statement; receivables are derecognised or impaired, as well as Other investments include short-term deposits or hedges of foreign currency risk of firm • loans and receivables ; or through the amortisation process. with Government or banks, including Money Market commitments (cash flow hedges). • available for sale financial assets. Fund investments. Other investments are classified Available for sale financial assets as loans and receivables financial instruments. The fair value of hedging derivatives is classified Financial liabilities within the scope of IAS 39 ‘Available for sale financial assets’ are non-derivative as a non-current asset or a non-current liability if are classified as either financial liabilities at fair financial assets that are designated as such or are not Financial assets – trade and other receivables the remaining maturity of the hedge relationship value through the Comprehensive Income and classified in any of the other categories. After initial Trade and other receivables are classified as loans is more than 12 months and as a current asset Expenditure Statement or financial liabilities recognition, interest is taken to the Comprehensive and receivables financial instruments. or a current liability if the remaining maturity of measured at amortised cost. Income and Expenditure Statement using the the hedge relationship is less than 12 months. effective interest rate method and the assets are Financial liabilities – interest bearing loans Derivatives not designated into an effective hedge The Group determines the classification of its measured at fair value with gains or losses being and borrowings relationship are classified as a current asset or a financial instruments at initial recognition and recognised as a separate component of reserves All loans and borrowings are classified as financial current liability. re-evaluates this designation at each financial year until the investment is derecognised, or until the liabilities measured at amortised cost. end. When financial instruments are recognised investment is deemed to be impaired at which time Hedge accounting initially, they are measured at fair value, being the the cumulative gain or loss previously reported in Financial liabilities – obligations under finance In order to qualify for hedge accounting, at transaction price plus any directly attributable reserves is included in the Comprehensive Income leases and PFI arrangements inception of the transaction the Group formally transactional costs. The exception to this is for and Expenditure Statement. All obligations under finance leases and PFI designates and documents the hedging relationship, assets and liabilities measured at fair value, where arrangements are classified as financial liabilities which includes the Group’s risk management transaction costs are immediately expensed. Financial liabilities at fair value through the measured at amortised cost. objective and strategy for undertaking the hedge, Comprehensive Income and Expenditure identification of the hedging instrument, the The subsequent measurement of financial Statement (held for trading) Financial liabilities – trade and other creditors hedged item, the nature of the risk being hedged instruments depends on their classification Derivative liabilities are classified as held for Trade and other creditors are measured at and how the Group will assess the hedging as follows: trading unless they are designated as hedging amortised cost. instrument’s effectiveness. In addition, instruments. They are carried in the balance sheet an instrument is only designated as a hedge Financial assets at fair value through the at fair value with gains or losses recognised in the Derivative financial instruments when it is expected to be highly effective in Comprehensive Income and Expenditure Comprehensive Income and Expenditure Statement. The Group enters into derivative instruments to offsetting changes in fair value or cash flows Statement (held for trading) manage its exposure to interest rate risk arising attributable to the hedged risk as designated Financial assets are classified as held for trading Financial liabilities measured at amortised cost from financing activities. An interest rate swap and documented and where effectiveness is if they are acquired for sale in the short term. All non-derivative financial liabilities are classified hedges the Group’s exposure to movements in capable of reliable measurement. Derivatives are also classified as held for trading as financial liabilities measured at amortised cost. interest rates on borrowings. The Group does not unless they are designated as hedging instruments. Non-derivative financial liabilities are initially hold or issue derivative instruments for speculative At the inception of the hedge relationship the Assets are carried in the balance sheet at fair recognised at the fair value of the consideration purposes. The use of derivatives is governed by Group documents the relationship between the value with gains or losses recognised in the received, less directly attributable issue costs. After the Group’s policies, approved by the Board. hedging instrument and hedged item, along with Comprehensive Income and Expenditure Statement. initial recognition, non-derivative financial liabilities Derivatives are initially recognised at fair value at its risk management objectives and its strategy are subsequently measured at amortised cost using the date a derivative contract is entered into and for undertaking various hedge transactions. Loans and receivables the effective interest method. Gains and losses are subsequently remeasured to their fair value at Furthermore, at the inception of the hedge and on Loans and receivables are non-derivative financial are recognised in the Comprehensive Income and each reporting date. The resulting gain or loss is an ongoing basis, the Group documents whether assets with fixed or determinable payments that Expenditure Statement when the liabilities are recognised in profit or loss immediately unless the the hedging instrument that is used in a hedging are not quoted on an active market, do not qualify derecognised or impaired, as well as through the derivative is designated and effective as a hedging relationship is highly effective in offsetting changes as trading assets and have not been designated amortisation process. instrument, in which event the timing of the in fair values or cash flows of the hedged item.

84 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 85 Accounting Policies (continued) Notes to the Financial Statements Contents

Derivatives qualify for hedge accounting if changes Fair value measurement of 1. Gross Income in the fair value or cash flows of the hedging financial instruments instrument attributable to the hedged risk are The fair value of quoted investments is determined expected to be highly effective in offsetting the by reference to bid prices at the close of business a) Gross income changes in the fair value or cash flows of the on the balance sheet date, within Level 1 of the fair 2011 % of Restated 2010 % of hedged item on a prospective basis and on a value hierarchy as defined within IFRS 7. Year ended 31 March £m Total £m Total retrospective basis where actual results are within Fares 2.942.3 75.8 2,662.8 74.1 a range of 80 per cent to 125 per cent. Where Where there is no active market, fair value is derivatives or portions of hedges do not qualify determined using valuation techniques. These Revenue in respect of free travel for the for hedge accounting, they are recorded at fair include using recent arm’s length transactions; elderly and disabled 251.0 6.5 243.8 6.8 value through the Comprehensive Income and reference to the current market value of another Congestion Charging 286.5 7.4 312.6 8.7 Expenditure Statement and any change in value instrument which is substantially the same; and Charges to London boroughs 13.2 0.3 13.2 0.4 is immediately recognised in the Comprehensive discounted cash flow analysis and pricing models. Charges to transport operators 8.3 0.2 7.3 0.2 Income and Expenditure Statement. In the absence of quoted market prices, derivatives Bus enforcement 41.7 1.1 32.3 0.9 Cash flow hedges are valued by using quoted forward prices for the Commercial advertising receipts 106.5 2.7 92.2 2.6 Derivative instruments are classified as cash flow underlying commodity/currency and discounted Rents receivable 59.2 1.5 57.3 1.6 hedges when they hedge the Group’s exposure to using quoted interest rates (both as at the close Taxi licensing 20.6 0.5 18.5 0.5 variability in cash flows attributable to a particular of business on the balance sheet date). Hence, risk associated with a recognised asset or liability derivatives are within Level 2 of the fair value Museum income 3.1 0.1 2.9 0.1 or a highly probable forecast transaction. Derivative hierarchy as defined within IFRS 7. Other 151.8 3.9 152.1 4.1 instruments qualifying for treatment as cash flow 3,884.2 100.0 3,595.0 100.0 hedges are principally interest rate caps. Impairment of financial assets Financial assets are assessed at each balance sheet The effective portion of changes in the fair value of date to determine whether there is any objective b) Congestion Charging derivatives that are designated and qualify as cash evidence that they are impaired. Individually flow hedges is deferred in reserves. The gain or significant financial assets are tested for impairment Group and Group and Corporation Corporation loss relating to the ineffective portion is recognised on an individual basis. 2011 2010 immediately in profit or loss. £m £m All impairment losses are recognised in the Income 286.5 312.6 Amounts deferred in reserves are recycled in profit Comprehensive Income and Expenditure Statement. or loss in the periods when the hedged items (the Toll facilities and traffic management (102.6) (144.4) hedged asset or liability) are recognised in the Embedded derivatives 183.9 168.2 Comprehensive Income and Expenditure Statement. Derivatives that are embedded in other financial Administration, support services and depreciation (10.4) (10.1) instruments or other host contracts are treated Net income from Congestion Charging 173.5 158.1 Hedge accounting is discontinued when the Group as separate derivatives when their risks and revokes the hedging instrument relationship, or the characteristics are not closely related to those hedging instrument expires, is sold, terminated, of the host contracts, and the host contracts are The net revenues from the Congestion Charge are spent on improving transport in line with the Mayor’s exercised or no longer qualifies for hedge not carried at fair value. Embedded derivatives Transport Strategy. accounting. Any cumulative gain or loss deferred are carried on the balance sheet at fair value from in reserves at that time remains in reserves and inception of the host contract. Unrealised changes The western extension scheme closed on 24 December 2010. is recognised when the forecast transaction is in fair value are recognised as gains/losses within ultimately recognised in profit or loss. When a the Comprehensive Income and Expenditure forecast transaction is no longer expected to occur, Statement during the period in which they arise. the cumulative gain or loss that was deferred in reserves is recognised immediately in profit or loss.

86 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 87 Notes to the Financial Statements (continued) Contents

2. Segmental analysis 2. Segmental analysis (continued)

Decisions taken by the Group’s Board about resource allocation are made using internal management Reconciliation of net operating expenditure per the segmental analysis to net cost of reports which show net operating expenditure. These management reports are presented on a segmental services for the year ended 31 March 2011 basis as shown below. £m

Year ended 31 March 2011 Net operating expenditure per the segmental analysis (1,345.9) London Tube London Surface Corporate Total Net expenditure of services not included in the segmental analysis Underground Lines* Rail Transport items £m £m £m £m £m £m Group items 9.0 Museum net revenue cost (4.8) Income 1,932.2 8.3 196.4 1,687.1 54.4 3,878.4 4.2 Expenditure (1,799.4) (255.3) (303.0) (2,580.0) (286.6) (5,224.3) Amounts included in the Comprehensive Income and Expenditure Net operating expenditure 132.8 (247.0) (106.6) (892.9) (232.2) (1,345.9) Statement not reported to management in the segmental analysis Depreciation (882.5) Year ended 31 March 2010 Amortisation 456.2 London Tube London Surface Corporate Total Goodwill write off (242.9) Underground Lines* Rail Transport items Pension service costs (note 24) (205.1) £m £m £m £m £m £m IFRS adjustments (428.2) Income 1,795.5 - 142.3 1,560.0 37.4 3,535.2 (1,302.5) Expenditure (2,499.9) - (287.9) (2,631.5) (376.7) (5,796.0) Amounts included in the segmental analysis not included Net operating expenditure (704.4) - (145.6) (1,071.5) (339.3) (2,260.8) in the Comprehensive Income and Expenditure Statement * Tube Lines was acquired on 27 June 201 Capital and interest payments under the PPP and PFI schemes 198.5 Pension payments charged to operating costs 251.7 The segmental analysis is prepared using internal • Depreciation, amortisation and impairment Interest charged to operating costs 5.6 management reporting accounting methodologies. charges are not included in the segmental analysis Grant funding of Museum 6.0 In some cases, these methodologies are different • Changes resulting from the adoption of IFRS have 461.8 from the accounting policies used in the financial not been included in the segmental analysis statements. The main differences between Net cost of services (2,182.4) the methodologies are explained below and • The cost of retirement benefits in the management reconciliations between the two are included on reports is based on cash flows rather than the the following pages: current service costs of benefits accrued in the year • Ad hoc items which do not fit into any of • The capital elements (i.e. capital repayment and the reporting segments are known internally financing costs) relating to PPP and PFI contracts as ‘Group items’. Group items are reported are included in the management reports in net separately to management and are not included in operating expenditure but they are not included in the segmental analysis net cost of services in the Comprehensive Income and Expenditure Statement • Due to its charitable status, the Museum is treated at arm’s length for management reporting • Some interest income and debt servicing costs and the only entry in relation to the Museum in in the subsidiaries are included in net operating the management reports is the grant that TfL has expenditure in the management reports but they agreed to pay the Museum are not included in net cost of services in the Comprehensive Income and Expenditure Statement

88 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 89 Notes to the Financial Statements (continued) Contents

2. Segmental analysis (continued) 2. Segmental analysis (continued)

Reconciliation of segmental analysis to subjective analysis for the year ended 31 March 2011 Reconciliation of net operating expenditure per the segmental analysis to net cost of services for the year ended 31 March 2010 Amounts Amounts Net included in the included in £m expenditure Income and the segmental of services Expenditure analysis not Net revenue cost per the segmental analysis (2,260.8) Net revenue not included Statement not included in the cost per the in the reported in Income and segmental segmental the segmental Expenditure Net expenditure of services not included in the segmental analysis analysis analysis analysis Statement Total Group items 50.0 £m £m £m £m £m Crossrail operating costs 1.0 Income 3,878.4 5.1 0.7 - 3,884.2 Museum net revenue cost (3.5) Staff costs (1,497.2) (4.6) (205.5) 251.7 (1,455.6) Items reported as capital for the segmental analysis but included as revenue in the 1.3 Other service expenses (3,727.1) 3.7 37.5 210.1 (3,475.8) statutory financial statements Depreciation, amortisation - - (1,135.2) - (1,135.2) 48.8 and impairment Amounts included in the Comprehensive Income and Expenditure Statement Total cost (5,224.3) (0.9) (1,303.2) 461.8 (6,066.6) not reported to management in the segmental analysis Net cost of services (1,345.9) 4.2 (1,302.5) 461.8 (2,182.4) Depreciation (801.4) Loss on disposal of assets (321.8) Amortisation of deferred capital grants 398.6 Interest income 408.0 FRS17 Pension service cost under TfL scheme (Note 24) (127.5) Interest payable (813.0) IFRS adjustments (Note 38) (430.8) Non-specific grant income 4,672.6 (961.1) Surplus on the provision of 1,763.4 Amounts included in the segmental analysis not included in the services before tax Comprehensive Income and Expenditure Statement Capital and interest payments under the PPP and PFI schemes 428.3 Cash payments under the TfL pension scheme 226.6 Interest income (0.4) Grant funding of Museum 5.6 660.1 Net cost of services (2,513.0)

90 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 91 Notes to the Financial Statements (continued) Contents

2. Segmental analysis (continued) 3. Gross expenditure

Reconciliation of segmental analysis to subjective analysis for the year ended 31 March 2010 Gross expenditure recognised in the Comprehensive Income and Expenditure Statement comprises:

Amounts Restated Restated included in the Amounts included Group Group Corporation Corporation Net Income and in the segmental 2011 2010 2011 2010 expenditure of Expenditure analysis not £m £m £m £m Net revenue services not Statement not included in the cost per the included in reported in Income and Staff costs: segmental the segmental the segmental Expenditure Wages and salaries 1,141.6 1,078.2 161.5 159.1 analysis analysis analysis Statement Total £m £m £m £m £m Social security costs 96.8 87.9 14.2 13.3 Income 3,535.2 59.1 0.7 - 3,595.0 Pension costs 217.2 131.9 31.4 43.1 Staff costs (1,399.7) - (120.9) 222.6 (1,298.0) 1,455.6 1,298.0 207.1 215.5 Other service expenses (4,396.3) (12.3) (5.5) 439.5 (3,974.6) Other service expenditure 3,475.8 3,974.7 622.0 707.8 Depreciation, amortisation - - (835.4) - (835.4) Depreciation 849.7 813.8 159.8 163.7 and impairment Amortisation 42.6 21.5 34.8 19.1 Total cost (5,796.0) (12.3) (961.8) 662.1 (6,108.0) Impairment 242.9 - - - Net cost of services (2,260.8) 46.8 (961.1) 662.1 (2,513.0) 6,066.6 6,108.0 1,023.7 1,106.1 Loss on disposal of assets (105.2) Interest income 285.3 Included in the Corporation’s other service expenditure is £193.2m (2009/2010 £181.7m) relating to financial assistance to London Boroughs and other third parties (see note 28 for detailed analysis). Interest payable (761.0) Non-specific grant income 3,337.8 The average number of persons employed in the year was: Surplus on the provision 243.9 Group Group Corporation Corporation of services before tax 2011 2010 2011 2010 Number Number Number Number Permanent staff (including fixed term contracts) 26,653 25,126 3,547 3,508 The segmental reporting analysis only deals with Group information and no disclosures are included for the Agency staff 1,814 2,290 290 385 Corporation. This is because the Corporation only results are not reported to the Board on a segmental basis. 28,467 27,416 3,837 3,893

Group Group Corporation Corporation 2011 2010 2011 2010 £m £m £m £m Cost of terminating contracts of employees 23.6 9.2 2.8 1.4

Number Number Number Number Number of employees 767 389 120 63

Organisational and operational efficiencies resulted in 767 employees leaving the Group, by mutual agreement, in 2010/11 (389 in 2009/10), which involved the Group making payments of £23.6m (2009/10 £9.2m). 328 employees left as a result of a review of support services in London Underground and 200 as a result of operational changes in London Underground. The remaining 239 individuals left as a result of a number of other smaller reorganisations.

92 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 93 Notes to the Financial Statements (continued) Contents

4. External audit fees 5. Remuneration

External audit fees are made up as follows: a) Employees’ remuneration The Code requires the disclosure of remuneration The remuneration disclosure is also affected by Group Group Corporation Corporation 2011 2010 2011 2010 for the Corporation’s employees whose total the Crossrail project moving into the delivery £m £m £m £m remuneration in the year was £50,000 or more, phase. The number of employees of Crossrail grouped in rising bands of £5,000. The impact Limited receiving total remuneration of £50,000 Auditors’ remuneration: of the transfer of employees into and out of or more has increased from 106 in 2009/10 to 131 for statutory audit services 2.1 1.6 0.6 0.4 the Corporation from subsidiaries can cause in 2010/11. The corresponding figures for those for non-statutory audit services 0.1 - 0.1 - distortion for year on year comparison purposes. receiving total remuneration of more than £100,000 Consequently, an additional voluntary disclosure are 23 for 2009/10 and 31 for 2010/11. for non-audit services 0.1 0.4 0.1 0.2 for the Group is provided that shows the combined 2.3 2.0 0.8 0.6 employee bands for TfL and its subsidiaries. Total remuneration includes termination payments, and these have the effect of increasing The Group’s remuneration disclosure for 2010/11 reported remuneration. Of those disclosed as includes the employees of the Tube Lines companies having received total remuneration of £50,000 for the first time. The remuneration for these or more, 99 have seen their total remuneration employees has been included for a full year, even for the year exceed £50,000 due to termination though they were only employees of the Group payments (2009/10 55). Of those disclosed as from 27 June 2010, in order to facilitate comparison having received total remuneration of £100,000 with future years. Those individuals who left the or more, 84 have seen their total remuneration employment of Tube Lines prior to 27 June 2010, for the year exceed £100,000 due to termination or as a result of the acquisition of Tube Lines by TfL, payments (2009/10 34). are not included in the Group salary bandings. Excluding the changes referred to above, the The impact of the acquisition of Tube Lines is number of staff earning over £100,000 is 196 to increase the number of employees with total (2010 – 194). remuneration of £50,000 or more by 1,024. The increase in those earning £100,000 or more is 68 The disclosure in note 5a includes all senior (37 of these staff have since left the organisation). employees also included in note 5b.

94 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 95 Notes to the Financial Statements (continued) Contents

5. Remuneration (continued) Employees’ remuneration, which includes their salaries, fees, performance bonus, benefits in kind, lump sums and termination payments, but excludes pension contributions paid by the employer, fell within the following bands:

Group Group Corporation Corporation Group Group Corporation Corporation 2011 2010 2011 2010 2011 2010 2011 2010 £ Number Number Number Number £ Number Number Number Number

50,000 – 54,999 1,845 1,406 224 157 205,000 – 209,999 1 5 - 2 55,000 – 59,999 1,125 901 164 128 210,000 – 214,999 1 1 - 1 60,000 – 64,999 837 572 146 106 215,000 – 219,999 2 1 1 - 65,000 – 69,999 549 403 103 80 220,000 – 224,999 1 - 1 - 70,000 – 74,999 383 249 69 66 225,000 – 229,999 - 2 - 1 75,000 – 79,999 241 205 49 43 230,000 – 234,999 3 3 1 - 80,000 – 84,999 195 124 47 27 250,000 – 254,999 2 - - - 85,000 – 89,999 122 116 22 30 255,000 – 259,999 - 1 - - 90,000 – 94,999 106 84 25 25 265,000 – 269,999 2 2 1 1 95,000 – 99,999 76 59 16 12 270,000 – 274,999 1 - - - 100,000 – 104,999 64 35 13 11 280,000 – 284,999 1 1 - 1 105,000 – 109,999 50 43 8 11 285,000 – 289,999 1 - 1 - 110,000 – 114,999 60 29 12 6 305,000 – 309,999 1 - - - 115,000 – 119,999 26 17 5 5 310,000 – 314,999 - 1 - 1 120,000 – 124,999 19 11 4 3 320,000 – 324,999 - 1 - - 125,000 – 129,999 24 10 4 5 325,000 – 329,999 1 - - - 130,000 – 134,999 27 20 5 5 330,000 – 334,999 1 - 1 - 135,000 – 139,999 11 9 5 2 365,000 – 369,999 1 - - - 140,000 – 144,999 10 9 1 2 385,000 – 389,999 1 - - - 145,000 – 149,999 14 10 2 3 390,000 – 394,999 - 1 - 1 150,000 – 154,999 11 9 3 1 515,000 – 519,999 - 1 - 1 155,000 – 159,999 8 3 1 - 550,000 – 554,999 - 1 - - 160,000 – 164,999 9 6 1 1 855,000 – 859,999 1 - - - 165,000 – 169,999 7 2 2 1 Total 5,858 4,370 942 745 170,000 – 174,999 4 7 - 3 175,000 – 179,999 5 4 3 2 b) Remuneration for senior employees Disclosure is made for each financial year under various 180,000 – 184,999 1 4 1 1 The Accounts and Audit Regulations 2011 categories, and set out on the following pages. 185,000 – 189,999 3 1 - - require disclosure of individual remuneration 190,000 – 194,999 2 - 1 - details for senior employees. Senior employees Employer’s pension contributions include the contribution are those with a base salary of £150,000 or in respect of future benefit accrual. Separately, member 195,000 – 199,999 - 1 - - more, calculated on a full time equivalent basis contributions are payable by employees at the rate of five 200,000 – 204,999 3 - - - for those working part-time. per cent of pensionable salary.

96 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 97 Notes to the Financial Statements (continued) Contents

5. Remuneration (continued)

Performance Total Performance Salary related pay Compensation remuneration Employer’s Salary related pay (including fees for 2009/10 for loss of excluding pension contribution (including fees for 2008/09 and allowances) paid in year employment Benefits in kind contributions to pension and allowances) paid in year 2010/11 2010/11 2010/11 2010/11 2010/11 2010/11 2009/10 2009/10 Note £ £ £ £ £ £ £ £ Current employees excluding Crossrail Peter Hendy, Commissioner a 330,201 - - 2,075 332,276 - 330,198 61,466 Steve Allen, Managing Director, Finance 268,327 - - 655 268,982 44,432 253,436 56,592 Mike Brown, Managing Director, London Underground b 283,155 - - 2,075 285,230 43,408 60,556 - Howard Carter, General Counsel 217,081 - - 2,075 219,156 41,304 217,081 49,588 Leon Daniels, Managing Director, Surface Transport c 97,000 - - - 97,000 - - - Michèle Dix, Managing Director, Planning d 145,740 - - 2,026 147,766 37,285 145,740 32,660 Vernon Everitt, Managing Director, Group Marketing and Communications 228,235 - - 2,075 230,310 22,244 228,235 53,797 Sarah Atkins, Commercial Director, Tube Lines e 155,615 31,230 - 1,631 188,476 37,278 155,615 27,000 Ian Campbell, Chief Information Officer f 164,434 - - 1,631 166,065 38,179 18,973 - Howard Collins, Chief Operating Officer, London Underground 174,400 26,250 - 1,631 202,281 45,676 194,186 24,000 Stephen Critchley, Chief Finance Officer 159,488 20,000 - - 179,488 37,163 159,488 20,000 Frank Douglas, Group Human Resources Director g 192,338 - - 49 192,387 22,237 24,795 - Robert Doyle, Head of Track and Signals, London Underground h 173,488 - - 1,631 175,119 35,262 172,739 9,389 Gerald Duffy, Director of Employee Relations, London Underground 150,921 22,540 - 606 174,067 36,700 150,913 22,000 Garrett Emmerson, Chief Operating Officer Streets, Surface Transport 162,069 20,000 - 606 182,675 37,997 160,403 12,090 David Hendry, Finance Director, Surface Transport 152,717 25,000 - 1,631 179,348 36,666 151,139 20,000 Jon Lamonte, Chief Executive, Tube Lines i ------Philip Hufton, Asset Performance Director, London Underground 249,626 35,000 - - 284,626 22,235 232,891 35,000 Richard Parry, Strategy and Commercial Director, London Underground j 186,506 31,353 - - 217,859 60,809 184,709 - Ben Plowden, Director of Better Routes and Places, Surface Transport 155,777 21,000 - - 176,777 40,012 174,522 35,100 Peter Regan, Corporate Finance Director k 161,496 58,776 - 605 220,877 35,672 154,469 71,153 Geoff Virrels, Director of Projects, Tube Lines l 129,464 - - 1,631 131,095 27,915 130,886 - David Waboso, Director of Capital Programmes, London Underground m 186,616 15,345 - 1,631 203,592 56,339 177,888 27,500

98 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 99 Notes to the Financial Statements (continued) Contents

5. Remuneration (continued)

Performance Total Performance Salary related pay Compensation remuneration Employer’s Salary related pay (including fees for 2009/10 for loss of excluding pension contribution (including fees for 2008/09 and allowances) paid in year employment Benefits in kind contributions to pension and allowances) paid in year 2010/11 2010/11 2010/11 2010/11 2010/11 2010/11 2009/10 2009/10 Note £ £ £ £ £ £ £ £ Crossrail current office holders/employees Terry Morgan, Non-executive Chairman n 250,000 - - 1,632 251,632 - 208,333 - Rob Holden, Chief Executive 570,502 285,000 - 1,632 857,134 20,419 553,000 - David Allen, Finance Director 206,010 61,200 - 1,632 268,842 29,830 180,125 - Neil Farmer, IT Director o 153,060 14,875 - 1,632 169,567 30,220 90,029 - Andy Mitchell, Programme Director p 281,599 43,750 - 1,632 326,981 30,220 164,266 - Chris Sexton, Technical Director q 167,205 - - - 167,205 30,220 41,250 - Valerie Todd, Talent and Resources Director r 191,925 38,517 - 2,026 232,468 40,909 191,925 41,078

Former employees David Brown, Managing Director, Surface Transport s 269,265 - - 2,048 271,313 43,536 271,353 43,415 Ian Brown, Managing Director, London Rail t 205,719 - - 1,658 207,377 40,290 205,719 48,664 David Bennett, Implementation Director, Crossrail u 117,750 32,250 215,000 1,350 366,350 61,463 152,561 - Keith Berryman, Land and Property Director, Crossrail v 124,120 9,600 - - 133,720 23,863 145,075 6,750

a salary sacrificed for pension of £17,130 (2009/10 £17,132) i entered service 14 March 2011, no salary received p entered service 1 August 2009 in 2010/11 b entered service 22 March 2010 q entered service 4 January 2010 j Interim Managing Director, London Underground from c entered service 20 April 2011, payment received in year 1 May 2009 to 22 March 2010. Performance related pay includes recompense for loss of benefits from previous r employed by TfL but on secondment to Crossrail since of £21,280 (2009/10 nil) sacrificed to pension fund employers and/or to comply with TfL’s policies January 2008 k left service after 31 March 2011 d part-time, three days per week s left service 31 March 2011. Performance related pay of l formerly Commercial Adviser, London Underground £nil (2009/10 £12,000) sacrificed to pension fund e formerly Director of Reviews and Legal, London two days per week. Seconded to Tube Lines with Underground, on secondment to Tube Lines since t left service 31 March 2011 effect from 25 June 2010, part-time four days per 28 June 2010 week. Performance related pay of nil (2009/10 £27,500) u entered service 20 July 2009, left service f entered service 1 February 2010 sacrificed to pension fund 15 October 2010 g entered service 15 February 2010. Left service after m performance related pay of £15,960 (2009/10 nil) v part-time four days per week from 1 January 2010, left 31 March 2011 sacrificed to pension fund service 31 March 2011 h performance related pay of £13,023 (2009/10 nil) n entered service 1 June 2009. Paid for providing services sacrificed to pension fund three days a week o entered service 24 August 2009

100 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 101 Notes to the Financial Statements (continued) Contents

6. Other operating expenditure 9. Grant income

Group Group Corporation Corporation Group Group Corporation Corporation 2011 2010 2011 2010 2011 2010 2011 2010 £m £m £m £m Note £m £m £m £m Net loss on disposal of property, plant and equipment 321.8 105.2 39.2 2.8 Non ring-fenced grant from the DfT used to 1,162.7 1,081.8 1,162.7 1,081.8 fund operations 7. Financing and investment income Other revenue grant received 107.6 101.8 107.6 101.8 Council tax precept 12.0 12.0 12.0 12.0 Group Group Corporation Corporation Total grants allocated to revenue 1,282.3 1,195.6 1,282.3 1,195.6 2011 2010 2011 2010 Non ring-fenced grant from the DfT used to fund capital 2,022.2 1,805.6 2,022.2 1,805.6 Note £m £m £m £m Ring-fenced grant to fund capital expenditure relating 1,020.0 172.0 1,020.0 172.0 Interest income on bank deposits 9.4 13.9 8.8 13.2 to Crossrail Interest income on loans to subsidiaries - - 136.1 97.8 Business Rates Supplement levied to fund capital 27 202.0 - 202.0 - Change in fair value of investment properties 13 29.1 25.8 0.5 0.2 expenditure relating to Crossrail Net gain on disposal of investment properties 7.7 13.4 - - Other capital grants and contributions received 146.1 164.6 27.1 14.0 2,142.2 1,991.6 Expected return on pension assets 24 361.8 232.2 2.4 2.3 Total grants allocated to capital 3,390.3 3,271.3 Total grants 4,672.6 3,337.8 4,553.6 3,187.2 408.0 285.3 147.8 113.5

Allocation of capital grants 8. Financing and Investment expenditure Group Group Corporation Corporation 2011 2010 2011 2010 Note £m £m £m £m Group Group Corporation Corporation 2011 2010 2011 2010 Capital grant funding of subsidiaries - - 1,704.9 1,805.6 Note £m £m £m £m Applied capital grants 25 2,365.1 1,970.2 541.2 14.0 Interest payable on loans 258.1 164.3 188.2 164.1 Unapplied capital grants 1,025.2 172.0 1,025.2 172.0 Interest payable on loans to subsidiaries - - 68.3 - Total capital grants 3,390.3 2,142.2 3,271.3 1,991.6 Interest payable on finance lease liabilities 137.4 246.6 9.1 9.3 Contingent rentals on PFI contracts 12.0 10.0 2.6 2.0 Other interest payable 6.1 0.3 - 0.2 Net loss on disposal of investment properties - - 0.2 1.5 Expected cost of pension scheme liabilities 24 399.4 339.8 5.7 5.2 813.0 761.0 274.1 182.3

102 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 103 Notes to the Financial Statements (continued) Contents

10. Taxation 10. Taxation (continued)

TfL Corporation is exempt from corporation tax but its subsidiaries are assessable individually to taxation in b) Unrecognised deferred tax assets accordance with current tax legislation. All companies, with the exception of Crossrail Limited, are able to claim group relief. The prior period current tax credit relates to repayable tax credits in respect of claims for The Group has a potential net deferred tax asset of £1,946.8m (2010: £1,737.7m). No deferred tax asset earlier periods for Land Remediation Relief and Enhanced Capital Allowances. has been recognised as it is not considered probable that there will be future taxable profit available against which the unused tax losses and unused tax credits can be utilised. The tax losses and the deductible a) Corporation tax temporary differences do not expire under current tax legislation. The Group tax credit for the year, based on the rate of corporation tax of 28% (2010: 28%), comprised: The potential net deferred tax asset can be attributed to the following:

Group Group 2011 2010 Assets £m £m 2011 2010 Current tax £m £m UK corporation tax - - Property, plant and equipment 720.6 470.7 Adjustments in respect of prior years (1.3) - Investment properties - - Total current tax credit (1.3) - Retirement benefit obligations 19.0 6.5 Deferred tax - - Provisions 17.0 16.1 Total tax credit for the year (1.3) - Finance leases - 527.0 Other 0.6 0.9

Reconciliation of tax credit Tax value of losses carried forward 1,263.1 791.2 Group Group Deferred tax asset 2,020.3 1,812.4 2011 2010 £m £m Liabilities Surplus on the provision of services before tax 1,763.4 243.9 Surplus on the provision of services before tax multiplied by standard rate of corporation tax 493.8 68.3 2011 2010 in the UK of 28 % (2010: 28 %) £m £m Effects of: Property, plant and equipment - - Non-deductible expenses (264.6) (415.5) Investment properties (70.8) (74.3) Permanent difference in TfL Corporation (319.3) 125.5 Retirement benefit obligations - - Amount charged to the current tax computation for which no deferred tax was recognised (487.7) 26.5 Provisions - - Tax losses carried forward for which no deferred tax was recognised 578.9 196.0 Finance leases - - Overseas earnings (1.1) (0.8) Other (2.7) (0.4) Adjustments in respect of prior years (1.3) - Tax value of losses carried forward - - Total tax credit for the year (1.3) - Deferred tax (liability) (73.5) (74.7)

104 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 105 Notes to the Financial Statements (continued) Contents

10. Taxation (continued) 11. Intangible assets b) Deferred tax (continued) a) Group intangible assets Net asset/(liability) Software costs Assets under Goodwill Total construction 2011 2010 Note £m £m £m £m £m £m Cost Property, plant and equipment 720.6 470.7 At 1 April 2009 78.0 14.2 - 92.2 Investment properties (70.8) (74.3) Additions 101.0 31.0 - 132.0 Retirement benefit obligations 19.0 6.5 Transfers between asset classes 3.5 (3.5) - - Provisions 17.0 16.1 At 31 March 2010 182.5 41.7 - 224.2 Finance leases - 527.0 Additions 13.8 14.3 - 28.1 Other (2.1) 0.5 Acquisitions 32 2.0 1.5 242.9 246.4 Tax value of losses carried forward 1,263.1 791.2 Transfers between asset classes 36.5 (36.5) - - Deferred tax asset/(liability) 1,946.8 1,737.7 Disposals (27.8) - - (27.8) At 31 March 2011 207.0 21.0 242.9 470.9 At 31 March 2011 the Group had tax losses carried forward of £4,858.1m (2010: £2,825.7m) on which a Amortisation and impairment deferred tax asset of £1,263.1m (2010: £791.2m) has not been recognised. At 1 April 2009 40.4 - - 40.4 Amortisation charge for the year 21.5 - - 21.5 c) Movement in unrecognised deferred tax assets during the year At 31 March 2010 61.9 - - 61.9 Deferred tax assets and their movements during the year, have not been recognised in respect of the following items: Amortisation charge for the year 42.6 - - 42.6 Impairment - - 242.9 242.9 Balance Balance Disposals (16.1) - - (16.1) 31 March Increase/ 31 March 2010 (decrease) 2011 At 31 March 2011 88.4 - 242.9 331.3 £m £m £m Net book value at 31 March 2011 118.6 21.0 - 139.6 Deductible temporary differences 946.5 (262.8) 683.7 Net book value at 31 March 2010 120.6 41.7 - 162.3 Tax losses 791.2 471.9 1,263.1 Net book value at 1 April 2009 37.6 14.2 - 51.8 Total 1,737.7 209.1 1,946.8

The key movements in the period were due to the following: • Retirement benefit obligations: the movement of £12.5m relates to the assumption of retirement benefit obligations in relation to the Tube Lines Group, as recognised in Other Comprehensive Income. • Property, plant and equipment: the movement on Property, plant and equipment relates to assets acquired in the year. Included in this is the revaluation of £0.9m recognised in Other Comprehensive Income. • Finance leases: the unrecognised deferred tax asset relating to the finance lease creditor in respect of the PPP contract with Tube Lines was eliminated following the acquisition of Tube Lines in June 2010. The corporation tax rate has reduced from 28% to 26% from 1 April 2011 and there will be three further annual 1% cuts to 23% by 1 April 2014. As the decrease in tax rate to 26% was substantively enacted on 29 March 2011 the closing deferred tax balances have been calculated using this rate. Other than the enacted change to 26%, the effects of the announced changes are not reflected in the financial statements for the year ended 31 March 2011. The impact of the change in corporation tax rate is not material.

106 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 107 Notes to the Financial Statements (continued) Contents

11. Intangible assets (continued) 12. Property, plant and equipment b) Corporation intangible assets a) Group property, plant and equipment at 31 March 2011 comprised the following elements:

Software Assets under Infrastructure and Rolling Plant and Assets under costs construction Goodwill Total office buildings stock equipment construction Total Note £m £m £m £m Note £m £m £m £m £m

Cost Cost or valuation At 1 April 2009 66.9 9.2 - 76.1 At 1 April 2010 23,268.4 3,645.7 1,329.5 5,575.9 33,819.5 Additions 87.7 21.3 - 109.0 Additions 276.8 2.6 32.3 2,566.4 2,878.1 At 31 March 2010 154.6 30.5 - 185.1 Acquisitions 32 10.9 23.7 6.9 6.9 48.4 Additions 1.5 6.5 - 8.0 Transfers to investment - - - (2.3) (2.3) Transfers between asset classes 29.3 (29.3) - - property Disposals (33.6) - - (33.6) Disposals (455.4) (214.0) (104.8) - (774.2) At 31 March 2011 151.8 7.7 159.5 Reclassifications 2,559.0 399.2 67.7 (3,025.9) - Amortisation and impairment Revaluation (0.8) - - - (0.8) At 1 April 2009 32.3 - - 32.3 Amortisation charge for the year 19.1 - - 19.1 At 31 March 2011 25,658.9 3,857.2 1,331.6 5,121.0 35,968.7 At 31 March 2010 51.4 51.4 Depreciation At 1 April 2010 9,109.9 2,267.0 790.9 - 12,167.8 Amortisation charge for the year 34.8 - - 34.8 Depreciation charge for the year 3 615.8 104.7 129.2 - 849.7 Disposals (16.0) - - (16.0) Disposals (172.8) (202.0) (77.0) - (451.8) At 31 March 2011 70.2 - 70.2 Reclassifications (0.8) 0.8 - - Net book value at 31 March 2011 81.6 7.7 - 89.3 Revaluation (1.7) - - - (1.7) Net book value at 31 March 2010 103.2 30.5 - 133.7 At 31 March 2011 9,551.2 2,168.9 843.9 - 12,564.0 Net book value at 1 April 2009 34.6 9.2 - 43.8 Net book value 31 March 2011 16,107.7 1,688.3 487.7 5,121.0 23,404.7 31 March 2010 14,158.5 1,378.7 538.6 5,575.9 21,651.7

108 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 109 Notes to the Financial Statements (continued) Contents

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued) b) Group property, plant and equipment at 31 March 2010 comprised the following elements: b) Group property, plant and equipment at 31 March 2010 (continued)

Infrastructure and Rolling Plant and Assets under Total Borrowing costs are included in the costs of qualifying assets to the extent that the asset is funded by office buildings stock equipment construction borrowings. However, as explained in accounting policy note a), the Group has opted to use the date Note £m £m £m £m £m of transition to IFRS (1 April 2009) as the effective date for applying IAS 23 Borrowing costs (‘IAS 23’). At the transition date, the majority of the projects funded by borrowing, including Crossrail, had Cost or valuation At 1 April 2009 22,043.0 3,588.5 1,241.5 4,286.4 31,159.4 already commenced and are therefore not impacted by IAS 23. As a result, the total borrowing costs capitalised during the year was £nil (2009/10 £nil). The cumulative borrowing costs capitalised are also Additions 111.4 38.8 43.5 2,794.2 2,987.9 £nil (2009/10 £nil). Disposals (201.3) (12.5) (108.7) (6.3) (328.8) Reclassifications 1,314.3 30.9 153.2 (1,498.4) - At 31 March 2011, the Group had capital commitments which are contracted for but not provided for in the Revaluation 1.0 - - - 1.0 financial statements amounting to £4,764.0m (2009/10 £2,579.6m).

At 31 March 2010 23,268.4 3,645.7 1,329.5 5,575.9 33,819.5 c) Group PFI assets and other leased assets Depreciation The net book value above includes the following amounts in respect of PFI and other leased assets: At 1 April 2009 8,669.1 2,174.5 730.5 - 11,574.1 Depreciation charge for the year 3 550.5 104.9 158.4 - 813.8 Infrastructure Rolling Plant and Assets under Total and office stock equipment construction Disposals (108.3) (12.4) (98.0) - (218.7) buildings Revaluation (1.4) - - - (1.4) £m £m £m £m £m At 31 March 2010 9,109.9 2,267.0 790.9 - 12,167.8 Gross cost Net book value PFI assets 1,405.7 45.3 37.7 - 1,488.7 1 April 2009 13,373.9 1,414.0 511.0 4,286.4 19,585.3 Other leased assets - 407.7 - - 407.7 1,405.7 453.0 37.7 - 1,896.4 Depreciation PFI assets 252.9 25.5 15.5 - 293.9 Other leased assets - 85.7 - - 85.7 252.9 111.2 15.5 - 379.6 Net book value at 31 March 2011 1,152.8 341.8 22.2 - 1,516.8 Net book value at 31 March 2010 1,211.5 355.8 25.5 - 1,592.8

110 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 111 Notes to the Financial Statements (continued) Contents

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued) d) Depreciation charge f) Corporation property, plant and equipment at 31 March 2011 comprised the following elements: The total depreciation charge for the Group for the year comprised of the following: Infrastructure and Plant and Assets under 2011 2010 office buildings equipment construction £m £m Total Note £m £m £m £m Depreciation of owned assets 775.7 739.7 Cost or valuation Depreciation of assets held under PFI 64.2 64.3 At 1 April 2010 4,555.2 262.2 591.6 5,409.0 Depreciation of assets held under other leases 9.8 9.8 Additions 113.2 8.2 302.8 424.2 Total depreciation 849.7 813.8 Transfers to investment property - - (2.3) (2.3) Disposals (19.3) (80.4) - (99.7) e) Group office buildings Reclassifications 63.7 1.7 (65.4) - The Group holds its office buildings at fair value. The value of these buildings at 31 March 2011 was At 31 March 2011 4,712.8 191.7 826.7 5,731.2 £104.7m (2010 £106.2m) and the historic cost was £52.5m (2010 £52.5m). Depreciation At 1 April 2010 2,125.5 153.6 - 2,279.1 Depreciation charge for the year 3 126.6 33.2 - 159.8 Disposals (12.9) (65.1) - (78.0) At 31 March 2011 2,239.2 121.7 - 2,360.9 Net book value 31 March 2011 2,473.6 70.0 826.7 3,370.3 31 March 2010 2,429.7 108.6 591.6 3,129.9

112 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 113 Notes to the Financial Statements (continued) Contents

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued) g) Corporation property, plant and equipment at 31 March 2010 comprised the following elements: g) Corporation property, plant and equipment at 31 March 2011 comprised the following elements: (continued)

Borrowing costs are included in the costs of qualifying assets to the extent that the asset is funded by Infrastructure and office buildings Plant and Assets under borrowings. However, as explained in accounting policy note a), the Corporation has opted to use the date equipment construction Total of transition to IFRS (1 April 2009) as the effective date for applying IAS 23 Borrowing costs (‘IAS 23’). At the Note £m £m £m £m transition date, the majority of the projects funded by borrowing, including Crossrail, had already commenced Cost or valuation and are therefore not impacted by IAS 23. As a result, the total borrowing costs capitalised during the year was At 1 April 2009 4,458.6 277.2 181.2 4,917.0 £nil (2009/10 £nil). The cumulative borrowing costs capitalised are also £nil (2009/10 £nil). Additions 46.6 18.2 487.8 552.6 At 31 March 2011, the Corporation had capital commitments which are contracted for but not provided for Disposals (14.0) (46.6) - (60.6) in the financial statements amounting to £69.1m (2010 £73.9m). Reclassifications 64.0 13.4 (77.4) - At 31 March 2010 4,555.2 262.2 591.6 5,409.0 h) Corporation PFI assets and other leased assets Depreciation The net book value above includes the following amounts in respect of PFI and other leased assets: At 1 April 2009 2,004.4 168.7 - 2,173.1 Depreciation charge for the year 3 132.2 31.5 - 163.7 Infrastructure Disposals (11.1) (46.6) - (57.7) and office Plant and buildings Equipment Total At 31 March 2010 2,125.5 153.6 - 2,279.1 £m £m £m Net book value 1 April 2009 2,454.2 108.5 181.2 2,743.9 Gross cost 209.1 16.7 225.8 Depreciation 50.1 10.9 61.0 Net book value at 31 March 2011 159.0 5.8 164.8 Net book value at 31 March 2010 166.7 7.5 174.2

114 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 115 Notes to the Financial Statements (continued) Contents

12. Property, plant and equipment (continued) 13. Investment properties i) The total depreciation charge for the Corporation for the year comprised of the following:

2011 2010 Group Corporation £m £m £m £m Depreciation of owned assets 150.4 154.3 Valuation Note Depreciation of assets held under PFI 9.4 9.4 At 1 April 2009 355.5 76.4 Total depreciation 159.8 163.7 Disposals (86.8) (58.5) Fair value adjustments 7 25.8 0.2 At 31 March 2010 294.5 18.1 j) Corporation office buildings Transfers from property, plant and equipment 2.3 2.3 The Corporation did not have any office buildings. Disposals (31.6) (7.1) Fair value adjustments 7 29.1 0.5 At 31 March 2011 294.3 13.8

The fair value of the Group’s investment properties at 31 March 2011 has been arrived at on the basis of valuations carried out at that date by DTZ, a property valuation company not connected with the Group, and by chartered surveyors working for Transport for London.

Properties are valued in accordance with the Valuation Standards (sixth edition) published by the Royal Institution of Chartered Surveyors. Properties with a carrying value in excess of £5,000,000 are valued annually. Properties with a value in excess of £250,000 but less than £5,000,000 are revalued every three years. Properties with a value in excess of £100,000 but less than £250,000 are revalued every five years. 14. Investments

Corporation Corporation Corporation 2011 2010 2009 £m £m £m

At 1 April 22.5 22.5 22.5 Investment in year 450.0 - - At 31 March 472.5 22.5 22.5

During the year the Corporation increased its investment in ordinary share capital of Transport Trading Limited (TTL) by £450.0m. TTL subsequently increased its investment in ordinary share capital in Crossrail Limited by the same amount.

116 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 117 Notes to the Financial Statements (continued) Contents

14. Investments (continued) 15. Derivative financial instruments

The Group’s principal subsidiaries are: Cash flow hedges Group Group Group Group Subsidiaries Principal activity 2011 2011 2010 2010 Transport Trading Limited Holding company Notional Fair Notional Fair value amount value amount London Underground Limited Passenger transport by underground train £m £m £m £m LUL Nominee BCV Limited Maintenance of underground lines Non-current assets LUL Nominee SSL Limited Maintenance of underground lines Interest rate swaps 4.9 350.0 - - Tube Lines (Holdings) Limited Holding company Non-current liabilities Tube Lines Limited Maintenance of Underground lines Interest rate swaps 0.5 150.0 - - Tube Lines (Finance) Plc Financing company UIC Transport (JNP) Limited Financing company The Group had not entered into any derivative financial instruments at 31 March 2009. Rail for London Limited Passenger transport by rail Docklands Light Railway Limited Passenger transport by rail The Corporation has not entered into any derivative financial instruments. Tramtrack Croydon Limited Passenger transport by tram London Bus Services Limited Passenger transport by bus London Buses Limited Dial-a-Ride Victoria Coach Station Limited Coach station London River Services Limited Pier operator Crossrail Limited Construction of Crossrail infrastructure Transport for London Finance Limited Manages financial risk of the Group London Transport Museum Limited Charitable company London Transport Museum (Trading) Limited Trading company London Transport Insurance (Guernsey) Limited Insurance

The Group holds 100 per cent of the share capital of all subsidiaries. The financial statements of these companies are lodged at Companies House and also at the Charity Commission for the London Transport Museum Limited. The statutory financial statements for the subsidiary companies for the period ended 31 March 2011 all received unqualified audit opinions.

118 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 119 Notes to the Financial Statements (continued) Contents

16. Inventories 17. Debtors

Group Group Group Group Group Group 2011 2010 2009 2011 2010 2009 £m £m £m Short-term £m £m £m Raw materials and consumables 35.1 17.8 19.5 Trade debtors 95.9 68.4 126.1 Goods held for resale 0.5 0.5 0.7 Capital debtors 12.4 208.8 30.1 35.6 18.3 20.2 Other debtors 16.4 39.3 26.0 Other tax and social security 77.0 83.1 52.6 Grant debtors 242.0 82.2 63.9 Corporation Corporation Corporation 2011 2010 2009 Amounts due relating to sale of non-current assets 47.4 10.4 - £m £m £m Interest debtors 2.3 0.8 27.0 Raw materials and consumables 3.2 2.3 2.7 Prepayments and accrued income 107.0 114.1 149.8 Goods held for resale - - - 600.4 607.1 475.5 3.2 2.3 2.7 Long-term Amounts due relating to sale of non-current assets - 34.9 - There is no material difference between the balance sheet value of inventories and their net realisable value. Prepayments for goods and services 6.9 4.6 3.6 The movement on inventories was as follows: 6.9 39.5 3.6

Group Corporation £m £m Corporation Corporation Corporation Balance at 1 April 2009 20.2 2.7 2011 2010 2009 Short-term £m £m £m Purchases in the year 19.2 6.4 Trade debtors 17.9 14.4 23.3 Recognised as an expense in the year: Capital debtors 12.4 208.8 30.1 Consumed in the year (17.2) (6.6) Amounts due from subsidiary companies 15.4 1.5 3.6 Goods sold in the year (1.6) Other debtors 2.1 7.3 - Write-offs in the year (2.3) (0.2) Other tax and social security 2.0 23.8 13.6 Balance at 31 March 2010 18.3 2.3 Grant debtors 227.3 53.9 30.6 Acquisitions (see note 32) 7.9 - Amounts due relating to sale of non-current assets 39.1 10.4 - Purchases in the year 48.4 5.0 Interest debtors 2.0 0.7 26.6 Recognised as an expense in the year: Prepayments and accrued income 13.5 12.6 82.6 Consumed in the year (35.4) (4.1) 331.7 333.4 210.4 Goods sold in the year (1.6) - Long-term Write-offs in the year (2.0) - Loans made to subsidiary companies 5,284.8 3,059.9 2,184.9 Balance at 31 March 2011 35.6 3.2 Amounts due relating to sale of non-current assets - 34.9 - Prepayments for goods and services 0.5 1.0 - 5,285.3 3,095.8 2,184.9

120 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 121 Notes to the Financial Statements (continued) Contents

18. Short-term investments 20. Creditors

2011 2010 2009 Group Group Group £m £m £m 2011 2010 2009 Short-term Note £m £m £m Group 2,012.7 1,472.5 1,967.8 Trade creditors 219.0 182.0 260.4 Interest accruals 13.4 6.2 4.8 2011 2010 2009 Capital works 593.4 565.7 443.5 £m £m £m Retentions on capital contracts 2.1 6.5 4.3 Corporation 1,978.9 1,427.8 1,925.8 Capital grants received in advance 10.8 8.6 4.0 Wages and salaries 81.5 76.6 76.7 Short-term investments relate to investments in UK Treasury bills and deposits with UK clearing banks, and also to Money Market Fund investments. In the previous years, there were no investments in UK Other taxation and social security creditors 30.5 23.8 23.3 Treasury bills. Receipts in advance for travel cards, bus passes and 224.4 188.0 191.5 Oyster cards 19. Cash and cash equivalents Other deferred income 55.9 78.8 69.4 Deferred consideration payable in relation 32 155.1 - - to acquisitions Group Group Group Accruals and other payables 570.7 583.8 711.0 2011 2010 2009 1,956.8 1,720.0 1,788.9 £m £m £m Cash at bank 33.5 17.4 13.8 Long-term Cash in hand and in transit 20.6 19.5 20.3 Trade creditors 14.3 15.4 16.6 54.1 36.9 34.1 Capital grants received in advance 3.0 3.1 3.7 Retentions on capital contracts 12.6 7.0 3.0 Other deferred income 25.5 12.1 13.3 Corporation Corporation Corporation 2011 2010 2009 Accruals and other payables 0.2 0.5 0.4 £m £m £m 55.6 38.1 37.0 Cash at bank - 7.0 11.2

122 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 123 Notes to the Financial Statements (continued) Contents

20. Creditors (continued) 21. Borrowings and overdrafts

Corporation Corporation Corporation Group Group Group 2011 2010 2009 2011 2010 2009 £m £m £m £m £m £m

Short-term Borrowings Short-term 494.2 - - Trade creditors 27.5 33.2 53.8 Long-term 5,892.5 4,117.8 3,017.6 Interest accruals 7.5 6.2 4.8 Capital works 46.3 51.9 66.8 Retentions on capital contracts 1.7 3.1 4.1 Corporation Corporation Corporation 2011 2010 2009 Capital grants received in advance 10.8 8.6 4.0 £m £m £m Amounts due to subsidiary companies 236.1 75.4 130.3 Short-term Wages and salaries 13.7 13.9 11.6 Borrowings 494.2 - - Other taxation and social security creditors 0.9 0.7 0.6 Bank overdraft 1.5 - - Other deferred income 14.5 25.6 17.6 Total 495.7 - - Accruals and other payables 155.9 168.9 186.9 Long-term 514.9 387.5 480.5 Borrowings 5,848.1 4,117.8 3,017.6 Long-term Retentions on capital contracts 1.6 1.3 0.8 See note 33 (Funding and Financial risk management) for further information about the maturity and interest Capital grants received in advance 3.0 3.1 3.7 rate profiles of the Group and Corporation’s borrowings. Other deferred income 18.9 5.9 5.9 Accruals and other payables 0.2 0.5 0.4 23.7 10.8 10.8

124 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 125 Notes to the Financial Statements (continued) Contents

22. Finance lease liabilities 22. Finance lease liabilities (continued) a) Group finance lease liabilities b) Corporation finance lease liabilities

The Group has finance lease liabilities that are payable as follows: The Corporation has finance lease liabilities that are payable as follows:

Minimum lease Minimum lease Principal payments Interest Principal payments Interest £m £m £m £m £m £m At 31 March 2011 At 31 March 2011 Not later than one year 170.1 (100.9) 69.2 Not later than one year 16.2 (8.8) 7.4 Later than one year but not later than five years 685.9 (355.5) 330.4 Later than one year but not later than five years 64.1 (31.9) 32.2 Later than five years 1,651.1 (631.7) 1,019.4 Later than five years 216.7 (54.0) 162.7 2,507.1 (1,088.1) 1,419.0 297.0 (94.7) 202.3 At 31 March 2010 At 31 March 2010 Not later than one year 16.0 (9.2) 6.8 Not later than one year 640.2 (242.2) 398.0 Later than one year but not later than five years 62.9 (33.1) 29.8 Later than one year but not later than five years 2,424.3 (581.2) 1,843.1 Later than five years 234.1 (61.5) 172.6 Later than five years 1,827.2 (712.5) 1,114.7 313.0 (103.8) 209.2 4,891.7 (1,535.9) 3,355.8 At 1 April 2009 At 1 April 2009 Not later than one year 14.9 (9.2) 5.7 Not later than one year 596.5 (240.1) 356.4 Later than one year but not later than five years 64.3 (34.6) 29.7 Later than one year but not later than five years 2,420.5 (695.5) 1,725.0 Later than five years 248.7 (69.3) 179.4 Later than five years 1,970.0 (789.5) 1,180.5 327.9 (113.1) 214.8 4,987.0 (1,725.1) 3,261.9

2011 2010 2009 2011 2010 2009 £m £m £m £m £m £m Current 7.4 6.8 5.7 Current 69.2 398.0 356.4 Non-current 194.9 202.4 209.1 Non-current 1,349.8 2,957.8 2,905.5 202.3 209.2 214.8 1,419.0 3,355.8 3,261.9

126 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 127 Notes to the Financial Statements (continued) Contents

23. Provisions 23. Provisions (continued) a) Group provisions b) Corporation provisions

Payments Charge for Releases in At 31 March Payments Charge for the Releases in At 31 March At 1 April 2010 in the year the year the year 2011 At 1 April 2010 in the year year the year 2011 £m £m £m £m £m £m £m £m £m £m

Compensation 37.3 (6.7) 60.2 (13.0) 77.8 Compensation 18.1 (5.7) 18.3 (7.2) 23.5 Capital investment activities 425.1 (143.0) 116.6 (100.3) 298.4 Capital investment activities 425.1 (143.0) 116.7 (100.4) 298.4 Environmental harm 47.6 (11.4) - (33.7) 2.5 Other 3.4 (1.3) 2.3 (1.2) 3.2 Other 55.4 (14.6) 25.1 (24.8) 41.1 446.6 (150.0) 137.3 (108.8) 325.1 565.4 (175.7) 201.9 (171.8) 419.8

Payments Charge for Releases in At 31 March Payments Charge for the Releases in At 31 March At 1 April 2009 in the year the year the year 2010 At 1 April 2009 in the year year the year 2010 £m £m £m £m £m £m £m £m £m £m

Compensation 66.6 (13.1) 19.6 (35.8) 37.3 Compensation 47.0 (12.3) 15.8 (32.4) 18.1 Capital investment activities 5.2 - 421.1 (1.2) 425.1 Capital investment activities 5.2 - 421.1 (1.2) 425.1 Environmental harm 51.5 (3.9) - - 47.6 Other 1.5 (0.6) 4.0 (1.5) 3.4 Other 30.0 (9.1) 50.5 (16.0) 55.4 53.7 (12.9) 440.9 (35.1) 446.6 153.3 (26.1) 491.2 (53.0) 565.4

Due:

Due: 2011 2010 2009 £m £m £m 2011 2010 2009 £m £m £m Current 224.3 265.8 29.1

Current 254.1 294.9 46.3 Non-current 100.8 180.8 24.6 Non-current 165.7 270.5 107.0 325.1 446.6 53.7 419.8 565.4 153.3

128 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 129 Notes to the Financial Statements (continued) Contents

23. Provisions (continued) Environmental harm 24. Pensions Environmental harm relates to potential costs c) Nature of provisions associated with damage to the environmental as a The majority of the Group’s staff are members of two sections of the TfL Pension Fund, namely the Public result of actions taken in the past. Sector Section and the Tube Lines Section. The latter section transferred to the Group with the Tube Lines Compensation business on 27 June 2010. The majority of the Group’s remaining staff belongs to the Local Government The Group has provisions for expected Capital investment activities Pension Scheme, the Principal Civil Service Pension Scheme or the Tube Lines defined contribution scheme. compensation and contractual claims that arise in Capital investment activities includes the respect of disputes arising in the ordinary course compulsory purchases, claims in respect of of business. The provisions recorded are based structural damage or diminution in value of a) Amount included in net cost of services on management’s best estimate at the balance properties affected by transport schemes, and other related third party claims. Group Group Corporation Corporation sheet date of the likely loss to be incurred through Note 2011 2010 2011 2010 settlement. Reflecting the inherent uncertainty with £m £m £m £m many legal proceedings and claim settlements, the Other TfL Pension Fund 205.7 120.9 - - timing and amount of the outflows could differ from Other provisions include Pension Protection Fund the amount provided. Based on current estimates fees and levies in respect of the LUL BCV and LUL Local Government Pension Scheme (4.1) 3.8 (4.1) 3.8 management expects that these amounts, which SSL former sections of the TfL Pension Fund for the Unfunded schemes provision 3.5 2.8 1.1 0.5 are based on known facts and take account of past two years to 31 March 2010, voluntary severance Schemes accounted for as defined benefit 205.1 127.5 (3.0) 4.3 experience for similar items, will be settled within costs arising from reorganisations, and other TfL Pension Fund - - 32.8 34.5 the next one to five years. Where material the smaller claims. provision held is discounted to its present value Principal Civil Service Pension Scheme 1.0 0.9 0.9 0.9 Other schemes 11.1 3.5 0.7 3.4 Amount included in net cost of services 3 217.2 131.9 31.4 43.1

The service cost for the Corporation for the TfL Pension Fund represents the employer’s contributions payable.

b) Defined benefit schemes Fund. The latest valuation of the Fund was carried This section deals with those pension funds to out as at 31 March 2009 by the Actuary, a partner which the Group contributes, that are accounted for of consulting actuaries Towers Watson, using the under IAS 19 as defined benefit schemes. projected unit method.

TfL Pension Fund A revised Schedule of Contributions was agreed between the Trustee and the employers The TfL Pension Fund, to which the Group following the formal funding valuation of the TfL contributes, is a final salary scheme established Pension Fund. under trust. The Fund’s Trustee is the TfL Trustee Company Limited, a wholly owned subsidiary of TfL. For the Public Sector Section, employers’ Under the rules of the Fund, its 18 Trustee Directors contributions for the period from 1 April 2010 until are nominated in equal numbers by TfL and on 31 March 2020 will continue to be 31.0 per cent, behalf of the Fund’s membership. with additional lump sum payments due in 2018, 2019 and 2020. The recovery plan states that the Every three years, the TfL Pension Fund’s actuary expectation is that the funding shortfall will be makes valuations and recommends the level of eliminated by 31 March 2020. contributions to be made by the participating employers to ensure the long-term solvency of the

130 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 131 Notes to the Financial Statements (continued) Contents

24. Pensions (continued) 24. Pensions (continued) b) Defined benefit schemes (continued) Local Government Pension Scheme b) Defined benefit schemes (continued) TfL Pension Fund (continued) The Local Government Pension Scheme is a funded Assumptions for defined benefit sections For the Tube Lines Section, employers’ contributions multi-employer defined benefit scheme. The The main actuarial assumptions used for the TfL Pension Fund (Public Sector and Tube Lines sections), for the period from 1 July 2010 to 31 December Corporation is able to identify its share of the assets the Local Government Pension Scheme, and unfunded arrangements (together ‘the Schemes’) were: 2017 will be 20.95 per cent, with additional lump and defined benefit obligation of the scheme and sum contributions of £0.9m payable each month until this scheme has therefore been accounted for as a defined benefit scheme under IAS19. Employer’s IAS 19 IAS 19 31 December 2017. The recovery plan states that IAS 19 valuation valuation at valuation at the expectation is that the funding shortfall will be contributions were payable at the rate of 15.8 per at 31 March 2011 31 March 2010 31 March 2009 eliminated by 31 December 2017. cent (2009/10 15.8 per cent) of pensionable pay. The % % % Corporation’s share of the underlying assets and RPI Inflation 3.35-3.5 3.8-3.9 2.2-3.1 The Corporation and the Group both account defined benefit obligation resulted in a deficit of CPI Inflation 2.7 n/a n/a for pension costs in accordance with IAS19. The £26.3m (2009/10 £46.9m). A full actuarial valuation underlying assets and defined benefit obligation was carried out at 31 March 2010 with the next Rate of increase in salaries 4.1-4.5 4.5-5.4 2.95-4.6 of the Public Sector Section cover a number of one due as at 31 March 2013. The annual report Rate of increase of pensions in payment and deferred pensions 2.7-3.5 3.8-3.9 2.9-3.1 and financial statements for the whole scheme can Group entities and cannot be readily split between Discount rate 5.5-5.65 5.5 6.9 each undertaking on a consistent and reliable be found on the London Pensions Fund Authority Investment return 6.8-7.4 6.3-6.4 basis. Thus, in accordance with the standard, the website (www.lpfa.org.uk). 6.7-7.4 Corporation treats contributions to the Public Sector Section as if they were contributions to a defined Unfunded pension costs contribution plan. The pension cost recognised The Group bears the cost of the augmentation of During 2010/11 the UK Government announced that The Government announcement has affected the in the Corporation’s financial statements for the the pensions of certain employees, who retire early public sector pension schemes should base their Local Government Pension Scheme, which is now Public Sector Section is the amount of contributions under voluntary severance arrangements. future statutory minimum pension increases on the using CPI rather than RPI. The lower CPI has resulted payable to the scheme during the year. Consumer Price Inflation Index (CPI) rather than the in a £6.0m past service credit being taken to the In addition, the Group bears the cost of: generally higher Retail Price Index (RPI), which they Comprehensive Income and Expenditure Statement A separate valuation of the Public Sector and Tube • ex-gratia payments which are made to certain have used in the past. (2009/10 £nil). The Group’s other pension Lines sections of the TfL Pension Fund has been former employees on retirement in respect of arrangements are not affected by the change. prepared for accounting purposes on an IAS19 basis service prior to the establishment of pension funds as at 31 March 2011. The assumptions used by the for those employees; actuary are the best estimates chosen from a range of possible actuarial assumptions, whilst the present • supplementary pensions, which are made to value of the schemes’ defined benefit obligation certain former employees who retired prior to is derived from cash flow projections. Due to the index linking of pensions; and timescale covered, neither the assumptions nor the • pensions of London Regional Transport (LRT) cash flow projections may necessarily be borne out former board members who did not qualify to join in practice. the TfL Pension Fund.

The defined benefit obligation for the TfL Pension Punter Southall, consulting actuaries, were Fund have been calculated using the mortality instructed to report on the financial position of the assumptions adopted for the latest funding unfunded pension defined benefit obligation as valuation as at 31 March 2009. Standard mortality at 31 March 2011 for the purpose of IAS 19 only. tables were used, adjusted to reflect the recent The report does not constitute a formal actuarial mortality experience of the Fund’s pensioners valuation of the unfunded pension defined benefit at that date. An allowance was made for future obligation. The valuation as at 31 March 2011 was mortality improvements in line with the medium £52.8m, (2010 £51.1m) and is fully provided for in cohort projections. these financial statements.

132 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 133 Notes to the Financial Statements (continued) Contents

24. Pensions (continued) 24. Pensions (continued) c) Accounting c) Accounting (continued) The total assets and the expected rate of return were: Expected Value at Expected Value at Expected Value at Corporation 2011 2010 2009 return 31 March return 31 March return 31 March £m £m £m 2011 2010 2009 % £m % £m % £m Fair value of scheme assets 23.8 44.7 38.2 Actuarial valuation of defined benefit obligation (78.2) (119.4) (79.1) Equities and alternatives 7.8 3,912.3 8.0 3,136.0 7.9 2,191.6 Deficit recognised as a liability in the balance sheet (54.4) (74.7) (40.9) Bonds 5.0 1,679.8 5.0 1,658.0 4.2 1,270.1 Cash and other 4.0 18.2 4.2 120.4 3.7 295.5 Corporation 2011 2010 2009 Total fair value of assets 5,610.3 4,914.4 3,757.2 £m £m £m

The TfL Pension Fund’s and the Local Government Pension Scheme’s assets consist of the following categories, by proportion of Local Government Pension Scheme (26.3) (46.9) (17.3) the total assets held: Unfunded schemes provision (28.1) (27.8) (23.6)

31 March 31 March 31 March Deficit recognised as a liability in the balance sheet (54.4) (74.7) (40.9) 2011 2010 2009 % % % Analysis of amounts included in the Comprehensive Income and Expenditure Statement Amount charged to net cost of services Equities 70 64 58 Bonds 30 34 34 Group Group Corporation Corporation 2011 2010 2011 2010 Cash, property and other assets - 2 8 £m £m £m £m 100 100 100 Current service cost 207.6 122.2 1.9 1.3

The unfunded pension schemes have no assets to cover their defined benefit obligation. Past service cost (2.5) 0.4 (4.9) 0.4 Curtailment and settlements - 4.9 - 2.6 Total pension deficit at end of year 205.1 127.5 (3.0) 4.3

Group 2011 2010 2009 Amounts charged to financing and investment income and expenditure £m £m £m Fair value of scheme assets 5,610.3 4,914.4 3,757.2 Group Group Corporation Corporation 2011 2010 2011 2010 Actuarial valuation of defined benefit obligation (7,230.4) (7,108.1) (4,944.7) £m £m £m £m Deficit recognised as a liability in the balance sheet (1,620.1) (2,193.7) (1,187.5) Interest on Schemes’ defined benefit obligations 399.4 339.8 5.7 5.2 Expected return on Schemes’ assets (361.8) (232.2) (2.4) (2.3) Group 2011 2010 2009 £m £m £m 37.6 107.6 3.3 2.9 TfL Pension Fund – Public Sector section (1,492.6) (2,095.7) (1,020.4) Amount recognised in other comprehensive income and expenditure TfL Pension Fund – LUL BCV and LUL SSL Sections - - (109.8) Group Group Corporation Corporation TfL Pension Fund – Tube Lines section (48.4) - - 2011 2010 2011 2010 Local Government Pension Scheme (26.3) (46.9) (17.3) £m £m £m £m

Unfunded schemes provision (52.8) (51.1) (40.0) Actuarial loss/(gain) recognised in year (647.2) 1,001.9 (16.6) 31.2 Deficit recognised as a liability in the balance sheet (1,620.1) (2,193.7) (1,187.5) Cumulative loss recognised at end of the year 1,156.5 1,803.7 31.5 48.1

134 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 135 Notes to the Financial Statements (continued) Contents

24. Pensions (continued) 24. Pensions (continued) c) Accounting (continued) c) Accounting (continued) Analysis of scheme defined benefit obligation into amounts arising from schemes that are wholly or partly funded History of experience gains and losses and wholly unfunded The history of experience adjustments on the plans for the current and previous financial years is as follows:

Group Group Corporation Corporation The Schemes 2011 2010 2011 2010 Group only £m £m £m £m 2011 2010 2009 2008 2007 Wholly unfunded schemes 52.8 51.1 28.1 27.8 Difference between the expected and actual return Wholly or partly funded schemes 7,177.6 7,057.0 50.1 91.6 on assets gain/ (loss) Total scheme defined benefit obligation 7,230.4 7,108.1 78.2 119.4 amount (£m) 106.8 852.3 (1,162.0) (321.9) 72.3 percentage of scheme assets 1.9% 17.3% 30.9% 7.8% 1.7% Reconciliation of defined benefit obligation: Differences between actuarial assumptions about defined Group Group Corporation Corporation benefit obligation and actual experience gain/(loss) 2011 2010 2011 2010 amount (£m) 70.0 380.0 (71.7) (156.2) (179.7) £m £m £m £m percentage of the present value of the scheme defined Actuarial value of defined benefit obligation benefit obligation 1.0% 5.3% 1.4% 3.3% 3.5% at start of year 7,108.1 4,944.7 119.4 79.1 Changes in the demographic and financial assumptions Defined benefit obligation acquired in the year 241.6 - - - used to estimate defined benefit obligation gain/(loss) Current service cost 207.6 122.2 1.9 1.3 amount (£m) 457.7 (2,234.2) 703.2 789.4 (97.9) Interest cost 399.4 339.8 5.7 5.2 percentage of the present value of the scheme defined Employee contributions 40.8 39.3 0.5 0.8 benefit obligation 6.3% 31.4% 14.2% 16.5% 1.9% Actuarial (gain)/loss (540.3) 1,863.0 (11.8) 39.7 (Deficit) at year end Actual benefit payments (224.3) (204.0) (32.6) (7.6) Fair value of assets at year end 5,610.3 4,914.4 3,757.2 4,124.7 4,137.9 Past service cost (2.5) 0.4 (4.9) 0.4 Actuarial value of defined benefit obligation at year end (7,230.4) (7,108.1) (4,944.7) (4,774.3) (5,127.9) Settlements and curtailments - 2.7 - 0.5 (Deficit) at year end (1,620.1) (2,193.7) (1,187.5) (649.6) (990.0) Actuarial value of defined benefit obligation at end of year 7,230.4 7,108.1 78.2 119.4

Reconciliation of fair value of the scheme assets:

Group Group Corporation Corporation 2011 2010 2011 2010 £m £m £m £m

Fair value of assets at start of year 4,914.4 3,757.2 44.7 38.2 Assets acquired in the year 150.5 - - - Expected return on assets net of expenses 361.8 232.2 2.4 2.3 Actuarial gain/(loss) 106.9 861.1 4.8 8.5 Actual employer contributions 256.6 227.0 1.8 2.1 Employee contributions 40.8 39.3 0.5 0.8 Actual benefits paid (220.7) (200.2) (30.4) (5.1) Settlements and curtailments - (2.2) - (2.1) 5,610.3 4,914.4 23.8 44.7

136 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 137 Notes to the Financial Statements (continued) Contents

24. Pensions (continued) 25. Unusable reserves d) Other pension arrangements Group 2011 2010 2009 Principal Civil Service Pension Scheme The Omnibus Section of the RPS is a multi-employer £m £m £m The Principal Civil Service Pension Scheme (PCSPS) scheme and is valued as a whole and as a result Capital adjustment account 12,435.4 10,974.5 9,621.5 is an unfunded multi-employer defined benefit of this; CRL is unable to identify its share of the Pension reserve (1,547.0) (2,170.4) (1,061.2) scheme. The Group is unable to identify its share of underlying assets and defined benefit obligation. It the underlying assets and defined benefit obligation is therefore accounted for as a defined contribution Accumulated absences reserve (4.5) (4.9) (4.1) on a consistent and reasonable basis and, as scheme under IAS19. Retained earnings reserve in subsidiaries 1,437.1 1,935.6 2,658.5 permitted by the multi-employer exemption in IAS Revaluation reserve 47.7 49.6 47.9 19, the Group treats contributions to the PCSPS as An actuarial valuation was carried out on the if they were contributions to a defined contribution Omnibus Section of the scheme at 31 December Hedging reserve 4.4 - - plan. A full actuarial valuation was carried out at 31 2007. The actuarial report showed that there was Merger reserve 466.1 466.1 466.1 March 2010, and the next valuation is due as at 31 a surplus between the assets and defined benefit At 31 March 12,839.2 11,250.5 11,728.7 March 2013. Details can be found in the Civil Service obligation of £6.2m for the total Omnibus Section. Superannuation Resource Accounts (www.civilserv- The results of the 31 December 2010 actuarial ice-pensions.gov.uk). valuation will be published later this year. Corporation 2011 2010 2009 Employers’ contributions were payable to the The current level of total contribution is 31 per cent, £m £m £m PCSPS at one of four rates in the range 17.1 per effective from 1 July 2009. The Trustee believes that Capital adjustment account 2,269.7 1,962.0 2,129.4 cent to 25.5 of pensionable pay, based on salary it would not be prudent to use the surplus disclosed bands. Employer contributions are reviewed every by the valuation to reduce contributions to less than Pension reserve (54.4) (74.7) (40.9) three years following a full scheme valuation by the the future service joint contribution rate. Accumulated absences reserve (4.5) (4.9) (4.1) Government Actuary. The contribution rates reflect At 31 March 2,210.8 1,882.4 2,084.4 benefits as they are accrued, not when the costs are Defined contribution schemes actually incurred, and reflect past experience of the The Group contributes to a number of defined scheme. contribution schemes, with contributions amounting to £11.1m (2009/10 £3.5m). The Tube Lines defined Railways Pension Scheme contribution scheme is one such scheme with Crossrail Limited (CRL) contributes to the Omnibus contributions amounting to £2.5m (2009/10 £ nil). Section of the Railways Pension Scheme (RPS). The RPS is a defined benefit arrangement for rail industry employees. The Omnibus Section is made up of 53 participating employers, each (apart from CRL) having fewer than 51 active members in the scheme.

138 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 139 Notes to the Financial Statements (continued) Contents

25. Unusable reserves (continued) 25. Unusable reserves (continued)

Capital adjustment account Pension reserve The Capital adjustment account absorbs the Comprehensive Income and Expenditure Statement The Pensions Reserve represents pension and to reflect inflation, changing assumptions and timing differences arising from the different (with reconciling postings from the Revaluation other post-retirement defined benefit obligations investment returns on any resources set aside to arrangements for accounting for the consumption Reserve to convert fair value figures to a historical shown on the balance sheet, excluding those meet the costs. However, statutory arrangements of non-current assets and for financing the cost basis). The account is credited with the reflected on the balance sheets of the subsidiary require benefits earned to be financed as the acquisition, construction or enhancement of those amounts set aside by TfL as finance for the costs companies. The pensions reserve absorbs the Corporation makes employer’s contributions to assets under statutory provisions. The account is of acquisition, construction and enhancement. timing differences arising from the different pension funds or eventually pay any pensions for debited with the cost of acquisition, construction The account also contains accumulated gains and arrangements for accounting for post employment which it is directly responsible. The debit balance on or enhancement as depreciation, impairment losses on investment properties. benefits and for funding benefits in accordance with the Pensions Reserve therefore shows a substantial losses and amortisations are charged to the statutory provisions. The Corporation accounts for shortfall in the benefits earned by past and current post employment benefits in the Comprehensive employees and the resources the Corporation has Income and Expenditure Statement as the benefits set aside to meet them. The statutory arrangements Group Group Corporation Corporation are earned by employees accruing years of service, will ensure that funding will have been set aside by 2011 2010 2011 2010 updating the defined benefit obligations recognised the time the benefits come to be paid. Note £m £m £m £m

Balance at 1 April 10,974.5 9,621.5 1,962.0 2,129.4 Group Group Corporation Corporation Charges for depreciation and 11, 12 (194.6) (182.8) (194.6) (182.8) 2011 2010 2011 2010 impairment of non-current assets Note £m £m £m £m Loss on sale of 8 (0.2) (1.5) (0.2) (1.5) Balance at 1 April (2,170.4) (1,061.2) (74.7) (40.9) investment properties Actuarial gains and losses on pension 24 609.4 (1,019.1) 16.6 (31.2) Movements in the market value of 7 0.5 0.2 0.5 0.2 assets and defined benefit obligations investment properties Reversal of charges relating 24 (229.2) (282.9) (0.3) (7.2) Capital grants and contributions 9 2,365.1 1,970.2 541.2 14.0 to retirement benefits Profit or loss on disposal of non 6 (26.0) (2.8) (39.2) (2.8) Employer’s pension contributions and direct 24 243.2 192.8 4.0 4.6 current assets payments to pensioners payable in the year Statutory provision for the - 5.5 - 5.5 Balance at 31 March (1,547.0) (2,170.4) (54.4) (74.7) financing of capital investment Adjustments between Group and (683.9) (435.8) - - Corporation financial statements Balance at 31 March 12,435.4 10,974.5 2,269.7 1,962.0 Accumulated absences reserve The Accumulated Absences Account absorbs in the year, e.g. annual leave entitlement carried the differences that would otherwise arise on forward at 31 March. Statutory arrangements require *The adjustment between Group financial required to recognise deferred capital grants on the the General Fund Balance from accruing for that the impact on the General Fund Balance is statements and Corporation financial statements balance sheet and recognise grant amortisation in neutralised by transfers to or from the Account. arises due to an alignment of the accounting arriving at their retained earnings. An accounting compensated absences earned but not taken policies between the Group and its subsidiaries. policy alignment is performed on consolidation to Under the Code, capital grants are recognised recognise the grant receipts in the Comprehensive Group Group Corporation Corporation in the Comprehensive Income and Expenditure Income and Expenditure Statement (from where 2011 2010 2011 2010 Statement and are then transferred to the Capital they are then transferred to the CAA). Equally, Note £m £m £m £m Adjustment Account (CAA) when utilised. No the amortisation and grant disposals are removed Balance at 1 April (4.9) (4.1) (4.9) (4.1) amortisation of grants or disposal of grants is from the Comprehensive Income and Expenditure Settlement or cancellation of accrual made at 24 4.9 4.1 4.9 4.1 recognised in the Comprehensive Income and Statement and are shown in the CAA so that the the end of the preceding year Expenditure Statement. TfL’s subsidiary companies total CAA adjustment is equal to the deferred Amounts accrued at the end of the current year 24 (4.9) (4.9) account under IFRS (rather than the Code) and are capital grant carried in the subsidiaries books. (4.5) (4.5) Balance at 31 March (4.5) (4.9) (4.5) (4.9)

140 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 141 Notes to the Financial Statements (continued) Contents

25. Unusable reserves (continued) 25. Unusable reserves (continued)

Retained earnings reserve in subsidiaries Hedging reserve The retained earnings reserve in subsidiaries represents the retained earnings in the Group’s subsidiary The hedging reserve holds the gain or loss on a hedging instrument that is determined to be an effective hedge. companies. These are disclosed as unusable reserves, as they are not backed by cash and are therefore not The ineffective portion, if any, is recognised immediately through the Comprehensive Income and Expenditure available to fund the expenditure of the Corporation Statement. The gain or loss deferred in reserves is recognised in the Comprehensive Income and Expenditure Statement in the period(s) during which the hedged forecast transaction affects profit or loss. Group Group 2011 2010 Group Group £m £m 2011 2010 Note £m £m Balance at 1 April 1,831.1 2,554.0 Loss for the year (539.2) (740.8) Balance at 1 April - - Actuarial gain 37.8 17.2 Net change in fair value of cash flow hedges 4.4 - Release of revaluation reserve relating to the difference between fair value deprecia- 2.4 0.7 Balance at 31 March 4.4 - tion and historical cost depreciation Release of revaluation reserve relating to the difference between historic cost 0.5 - The Corporation does not have a hedging reserve as it has not entered into any derivative transactions, nor of disposal and fair value cost of disposal does it have legal powers so to do. Balance at 31 March 1,332.6 1,831.1 Merger reserve The merger reserve of £466.1m arose as a result of the transfer of the net assets of London Regional Revaluation reserve Transport, including the share capital of London Underground Limited, to TfL in 2003. It represents the The Revaluation Reserve contains the gains made arising from increases in the value of property, plant and share capital of LUL and was taken as a credit to merger reserve. The Group has taken advantage of equipment. The balance is reduced when assets with accumulated gains are: the exemption in IFRS 1 not to restate business combinations occurring prior to the transition date of 1 April 2009. • Revalued downwards or impaired and the gains are lost • Used in the provision of services and the gains are consumed through depreciation, or • Disposed of and the gains are transferred to retained earnings. Group Group Corporation Corporation 2011 2010 2011 2010 Note £m £m £m £m Group Group 2011 2010 Balance at 1 April and 31 March 466.1 466.1 - - Note £m £m

Balance at 1 April 49.6 47.9 Revaluation of assets 12 1.0 2.4 Release of revaluation reserve relating to the difference between fair value (2.4) (0.7) depreciation and historical cost depreciation Release of revaluation reserve relating to the difference between historic (0.5) - cost of disposal and fair value cost of disposal Balance at 31 March 47.7 49.6

The Corporation does not have a revaluation reserve as it has no plant, property or equipment subject to valuation.

142 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 143 Notes to the Financial Statements (continued) Contents

26. Adjustments between accounting basis and funding 26. Adjustments between accounting basis and funding basis under regulations basis under regulations (continued)

This note details the adjustments that are made to the total Comprehensive Income and Expenditure Statement recognised by the Corporation in the year in accordance with proper accounting practice in order Corporation 2010 to determine the resources that are specified by statutory provisions as being available to the Corporation to meet future capital and revenue expenditure. Capital Accumulated Corporation 2011 General adjustment Pension absences fund account reserve reserve Note £m £m £m £m General Capital Pension Accumulated fund adjustment reserve absences Reversal of items debited or credited to the Comprehensive income and Expenditure Statement account reserve Charges for depreciation and impairment of Note £m £m £m £m non-current assets 12 163.7 (163.7) - - Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement Loss on sale of investment property 8 1.5 (1.5) - -

Charges for depreciation and 159.8 (159.8) - - Amortisation of intangible assets 19.1 (19.1) impairment of non-current assets Movements in the market value of investment Loss on sale of investment property 12 0.2 (0.2) - - properties 7 (0.2) 0.2 - - Amortisation of intangible assets 8 34.8 (34.8) - - Capital grants and contributions 9 (14.0) 14.0 - - Movements in the market value of 11 (0.5) 0.5 - - Unapplied capital grants (172.0) - - - investment properties Loss on disposal of Capital grants and contributions 7 (541.2) 541.2 - - non-current assets 6 2.8 (2.8) - - Unapplied capital grants 9 (1,025.2) - - - Reversal of items relating to retirement benefits 7.2 - (7.2) - Loss on disposal of 39.2 (39.2) - - non-current assets Difference between the remuneration charged on an accruals basis and the Reversal of items relating to 6 0.3 - (0.3) - remuneration chargeable in accordance with retirement benefits statutory requirements 0.8 - - (0.8) Difference between the (0.4) - - 0.4 Inclusion of items not debited or credited to the Comprehensive Income and Expenditure remuneration charged on an Statement which are required to be charged in accordance with statutory requirements accruals basis and the remuneration chargeable in accordance with Statutory provision for the financing of statutory requirements capital investment (5.5) 5.5 - -

Inclusion of items not debited or credited to the Comprehensive Income and Expenditure Employers pension contributions and direct Statement which are required to be charged in accordance with statutory requirements payments to pensioners payable in the year (4.6) - 4.6 - (1.2) (167.4) (2.6) (0.8) Employers’ pension contributions (4.0) - 4.0 - and direct payments to pensioners payable in the year

(1,337.0) 307.7 3.7 0.4

144 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 145 Notes to the Financial Statements (continued) Contents

26. Adjustments between accounting basis and funding 26. Adjustments between accounting basis and funding basis under regulations basis under regulations (continued)

This note details the adjustments that are made to the total Comprehensive Income and Expenditure Statement recognised by the Corporation in the year in accordance with proper accounting practice in order Corporation 2010 to determine the resources that are specified by statutory provisions as being available to the Corporation to meet future capital and revenue expenditure. Capital Accumulated Corporation 2011 General adjustment Pension absences fund account reserve reserve Note £m £m £m £m General Capital Pension Accumulated fund adjustment reserve absences Reversal of items debited or credited to the Comprehensive income and Expenditure Statement account reserve Charges for depreciation and impairment of Note £m £m £m £m non-current assets 12 163.7 (163.7) - - Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement Loss on sale of investment property 8 1.5 (1.5) - -

Charges for depreciation and 159.8 (159.8) - - Amortisation of intangible assets 19.1 (19.1) impairment of non-current assets Movements in the market value of investment Loss on sale of investment property 12 0.2 (0.2) - - properties 7 (0.2) 0.2 - - Amortisation of intangible assets 8 34.8 (34.8) - - Capital grants and contributions 9 (14.0) 14.0 - - Movements in the market value of 11 (0.5) 0.5 - - Unapplied capital grants (172.0) - - - investment properties Loss on disposal of Capital grants and contributions 7 (541.2) 541.2 - - non-current assets 6 2.8 (2.8) - - Unapplied capital grants 9 (1,025.2) - - - Reversal of items relating to retirement benefits 7.2 - (7.2) - Loss on disposal of 39.2 (39.2) - - non-current assets Difference between the remuneration charged on an accruals basis and the Reversal of items relating to 6 0.3 - (0.3) - remuneration chargeable in accordance with retirement benefits statutory requirements 0.8 - - (0.8) Difference between the (0.4) - - 0.4 Inclusion of items not debited or credited to the Comprehensive Income and Expenditure remuneration charged on an Statement which are required to be charged in accordance with statutory requirements accruals basis and the remuneration chargeable in accordance with Statutory provision for the financing of statutory requirements capital investment (5.5) 5.5 - -

Inclusion of items not debited or credited to the Comprehensive Income and Expenditure Employers pension contributions and direct Statement which are required to be charged in accordance with statutory requirements payments to pensioners payable in the year (4.6) - 4.6 - (1.2) (167.4) (2.6) (0.8) Employers’ pension contributions (4.0) - 4.0 - and direct payments to pensioners payable in the year

(1,337.0) 307.7 3.7 0.4

146 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 147 Notes to the Financial Statements (continued) Contents

29. Cash flow notes 29. Cash flow notes (continued) a. Adjustments to net surplus/(deficit) for non cash movements b. Investing activities

Group Group Corporation Corporation Group Group Corporation Corporation 2011 2010 2011 2010 2011 2010 2011 2010 £m £m £m £m £m £m £m £m Depreciation of property, plant and equipment 892.3 835.3 194.6 182.8 Interest received 7.9 40.1 143.6 137.0 and amortisation of intangibles Capital grants received 3,232.6 2,127.9 3,100.0 1,972.3 Impairment of goodwill 242.9 - - - Capital grants paid to subsidiaries - - (1,704.9) (1,805.6) Loss on sale of property, plant and equipment 321.8 105.2 39.2 2.8 Purchase of property, plant and (2,699.3) (2,282.1) (361.2) (326.7) (Gain)/loss on sale of investment property (7.7) (13.4) 0.2 1.5 equipmentand investment property Movements in the value of investment (29.1) (25.8) (0.5) (0.2) Purchase of intangible assets (28.1) (132.0) (8.0) (109.1) properties Proceeds from the sale of property, plant 12.4 4.8 - - Reversal of impairment losses on property (0.1) - - - and equipment, investment property and plant and equipment intangible assets Financing income (371.2) (246.1) (147.3) (113.3) (Purchases) of short-term (434.0) 495.3 (551.1) 498.0 investments/Proceeds from sale of Financing expense 813.0 761.0 273.9 180.8 short-term investments Capital goods received (2,142.2) (1,991.6) (3,390.3) (3,271.3) Loans to subsidiaries - - (2,224.9) (875.0) Capital grants paid to subsidiaries - - 1,704.9 1,805.6 Proceeds from sale of investment property 37.3 54.8 13.1 11.7 Reversal of pension service costs and interest (260.2) (230.7) (4.0) (4.6) Loan notes acquired (Note 32) (90.0) - - - Reversal of taxation credit (1.3) - - - Payments to acquire subsidiaries/ (65.1) - (450.0) - Cash flow from operating activities before (1,789.9) (956.7) (1,210.3) 63.8 investments in subsidiaries (Note 32/14) movements in working capital Cash acquired with subsidiaries 74.2 - - - Increase/(decrease) in creditors (191.9) (201.5) 143.6 (83.0) Net cash flows from investing activities 47.9 308.8 (2,043.4) (497.4) Decrease in debtors 45.7 48.5 9.2 62.5 (Increase)/decrease in inventories (9.5) 1.9 (0.9) 0.4 c. Financing activities Increase/(decrease) in provisions (21.0) (7.8) 5.2 (27.0) Cash flow utilised by operations (1,966.6) (1,115.6) (1,053.2) 16.7 Group Group Corporation Corporation 2011 2010 2011 2010 Cash payments for employers’ contributions 205.1 127.5 (3.0) 4.3 £m £m £m £m to pension funds and direct payments to pensioners Loans from subsidiaries - - 1,592.3 - Taxation refund received 1.4 - - - Cash payments for reduction of the (83.7) (242.3) (6.9) (5.6) Net cash utilised by operating activities (1,760.1) (988.1) (1,056.2) 21.0 outstanding liabilities relating to finance leases and on balance sheet PFI arrangements Proceeds from new borrowing 651.2 1,100.0 632.3 1,100.0 Repayments of borrowings (161.2) - - - Interest paid (441.6) (419.5) (266.9) (174.0) Net cash flows from financing activities (35.3) 438.2 1,950.8 920.4

148 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 149 Notes to the Financial Statements (continued) Contents

30. Sources of finance 31. Minimum revenue provision

Capital expenditure analysed by source of finance: The Local Government and Housing Act 1989 While the statutory guidance provides four required a Minimum Revenue Provision (MRP) to suggested options for the calculation of MRP, TfL Corporation Corporation 2011 2010 be set aside for the redemption of external debt. does not consider that any of these are appropriate £m £m As a statutory corporation regulated as if it were a to TfL’s circumstances. TfL’s policy on MRP is Capital expenditure local authority, TfL is required to comply with the to treat debt service (interest and principal) in its Local Authorities Capital Finance Regulations. New business plan as an in-year operating cost. As TfL Intangible asset additions 8.0 109.0 MRP regulations were approved by the Secretary of has a legal requirement to produce a balanced Property, plant and equipment additions 424.2 552.6 State in February 2008. TfL is required to approve an budget (and this approach had been extended to the Investments in year 450.0 - Annual MRP Statement determining the amount of full business plan), the cost of debt service is taken MRP which it considers to be prudent. account of in determining whether annual budget Loans made to subsidiaries in year 2,224.9 875.0 and business plans are in balance. Capital grants allocated to subsidiaries in year 1,704.9 1805.6 The Department for Communities and Local Total capital expenditure 4,812.0 3,342.2 Government issued guidance setting out four TfL has therefore adopted the following policy: Sources of finance possible methods which are deemed automatically • No provision is made for debt repayment in prudent, but also states that ‘approaches differing Transport grants used to fund capital 2,014.6 1,805.6 advance of years where any such repayment is due; from those exemplified should not be ruled out Business rates supplement 202.0 - the broad aim of prudent provision is to ensure • Debt service, including principal repayment, is Crossrail specific grant 2.4 - that debt is repaid over a period that is reasonably treated as an in-year operating cost and is funded from income in the year the debt service Prudential borrowing 2,589.4 1,152.6 commensurate with that over which the capital expenditure provides benefits.’ is required. Third party contributions 27.1 14.0 Capital receipts 6.9 57.1 Repayments of finance leases (6.9) (5.6) Working capital (23.5) 318.5 Total sources of finance 4,812.0 3,342.2

150 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 151 Notes to the Financial Statements (continued) Contents

32. Acquisitions Adjustments are made to identifiable assets and 32. Acquisitions (continued) liabilities on acquisition to reflect their fair value. Tube Lines Group The fair value of the net liabilities acquired was The assets and liabilities acquired are set out below: £22.7m which resulted in goodwill of £242.9m. On 27 June 2010, the acquisition of Tube Lines These fair values are provisional and represent (Holdings) Limited (TLHL) was completed, with estimates following a preliminary valuation 27 June 2010 27 June 2010 27 June 2010 100 per cent of the shares acquired for a exercise. The estimates may be adjusted to reflect Book value Fair value adjustments Fair value total consideration of £220.2m. any development in the issues to which they relate. £m £m £m As part of the exercise, management have reviewed Intangible assets 3.5 - 3.5 The Tube Lines group of companies consists of Tube Lines’ activities and concluded that there are TLHL (a holding company), Tube Lines Limited (TLL, Property, plant, and equipment 48.4 - 48.4 no further intangible assets above the £3.5m of which maintains the underground network), Tube Inventories 7.9 - 7.9 software already recognised by Tube Lines at Lines (Finance) Plc (TLF, a financing company) and 27 June 2011. Debtors 2,341.5 (39.7) 2,301.8 Tube Lines Pension Scheme Trustees Limited (the pension scheme trustee company). Tax assets 14.5 - 14.5 On 5 July 2010, TLL received early repayment of Investments 106.2 - 106.2 its contract debtor from London Underground, and Of the total consideration, £65.1m was paid in in turn repaid its loans from TLF. In order to reflect Cash and cash equivalents 74.2 - 74.2 cash on the date of acquisition with the remaining the now debt-free status of Tube Lines, London Creditors (290.5) (290.5) £155.1m being deferred until 6 April 2011. As part Underground and Tube Lines management agreed of the sale and purchase agreement, the Group also Borrowings (1,790.7) (78.2) (1,868.9) to amend the Infrastructure Service Charge (ISC). acquired £90.0m of shareholder loan notes. This Finance lease liabilities (326.5) - (326.5) The ISC has been reduced to a level such as to amount entitled the Group to receive payment of ensure TLL breaks even. Accordingly, the Group Provisions (2.2) - (2.2) the loan notes from Tube Lines rather than being a has impaired this goodwill down to £nil as it is payment made to obtain control, and as such the Retirement benefit obligation (91.1) - (91.1) unlikely that this amount is recoverable through the loan notes have been included in the tables below Net assets/(liabilities) 95.2 (117.9) (22.7) operations of the acquired business. as a liability of the acquired company rather than as Purchase consideration (220.2) part of the purchase consideration. Goodwill 242.9

The fair value exercise that was completed on the The majority of Tube Lines revenue derives from assets and liabilities of TLHL on the acquisition London Underground Limited and hence when Tube date resulted in two fair value adjustments. The Lines Group is consolidated into the TfL Group it has first of the fair value adjustments was to write the only a small effect on Group revenue. Tube Lines amounts recoverable on contracts down by £39.7m contribution to the Group’s surplus or deficit on the to management’s best estimate of the recoverable provision of services was £nil. amount. The second was an adjustment to increase the value of borrowings by £78.2m after calculating In the nine month period ended 31 March 2011, the the fair value of borrowings on the acquisition date Tube Lines Group contributed revenue of £8.3m and using valuation techniques including discounted profit of £nil. If the acquisition had occurred on 1 cash flows. April 2010, the impact on the consolidated revenue of the TfL Group would have been £11.1m and the In accordance with IFRS 3 Business Combinations, impact on the consolidated profit would have a review was completed to determine the value of been £nil. the pre-existing relationship that TfL had with Tube Lines. It was determined that there was no value For the six month period ended 27 June 2010, Tube to the pre-existing relationship as the contract was Lines Group recorded revenue of £287.8m and a loss neither favourable nor unfavourable to either party. before tax of £76.4m.

152 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 153 Notes to the Financial Statements (continued) Contents

33. Funding and financial The Group’s principal financial instruments comprise 33. Funding and financial risk Investments borrowings, investments, derivatives, finance lease All cash balances are invested in accordance with the risk management liabilities, cash and cash equivalents. These financial management (continued) Treasury Management Code and with regard to the instruments are used to manage funding and liquidity Department for Communities and Local Government Introduction requirements. Other financial instruments that arise Financial risks Guidance, which requires a prudent approach to the TfL is a statutory corporation established under directly from the Group’s operations include trade The Group is exposed to a number of financial risks investment of surplus funds with priority given to the Greater London Authority Act 1999 (‘the GLA receivables and payables. in the normal course of its business operations, the security and liquidity. Act’). TfL is funded by revenues (predominantly key ones being: TfL Group Treasury monitors the risk profile of its Investments are only made with I) the UK fares), grant and prudential borrowing. The majority • Credit risk of the Group’s debt is issued by the statutory body, borrowing, investment and derivative programmes Government and its executive agency, the Debt Transport for London, in the form of loans from the against approved benchmarks and provides regular • Liquidity risk Management Office; ii) UK Government Guaranteed Public Works Loan Board, the European Investment reports to the Managing Director, Finance and the • Market risk investments; iii) UK financial institutions with high Bank, Medium Term Notes under the £5 billion Chief Finance Officer. An annual report on overall (investment grade) credit ratings from a credit rating Each of these risks is managed in accordance with TfL Euro Medium Term Note programme, and performance against approved strategy is considered agency; or iv) Supranational agencies with AAA the Group’s Treasury Management Strategy. short-term Commercial Paper under the £2 billion by the Finance and Policy Committee (a committee credit ratings. TfL Euro Commercial Paper programme. In addition, of the TfL Board). following the acquisition of Tube Lines (Holdings) Credit risk Non-UK Government investments are made only Limited in June 2010, TfL guarantees the debt The Prudential Borrowing Regime Credit risk is managed on a Group-wide basis. Credit with banks and financial institutions if placed on issued by Tube Lines (Finance) Plc. TfL has the power to borrow as it is treated as a local risk is the risk of financial loss to the Group if a TfL’s Approved Investment List. In determining authority for the purposes of financial management customer or counterparty to a financial instrument whether to place an institution on the Approved Treasury Management under the Local Government Act 2003.In accordance fails to meet contractual obligations. The following Investment List, TfL considers the financial position categories comprise the main credit exposures of TfL has a Treasury Management Policy, which with this Act, the Mayor, in consultation with TfL, and jurisdiction of the institution, the market the Group. requires the TfL Board to approve a Treasury sets an affordable borrowing limit for external debt pricing of credit default swaps for the institution, Management Strategy on at least an annual basis, (including direct borrowing and other long-term any implicit or explicit Government support for the prior to the commencement of each financial year. liabilities). In setting these limits, the Mayor and Trade and other receivables institution and any other relevant factors that could the Corporation are required by regulation to have The majority of the Group’s trade debtors are influence the institution’s general creditworthiness. The Treasury Management Strategy also takes regard to the Prudential Code. Accordingly, the individuals who owe amounts relating to the use account of the CIPFA recommendations contained TfL Board annually approves indicators for prudent of transport infrastructure. The Group earns the Counterparty limits are set according to the in the Code of Practice and Cross-Sectoral Guidance and affordable borrowing, estimates of capital majority of revenue through prepaid fares, and assessed risk of each counterparty and exposures Notes (Fully Revised Second Edition) (the Treasury expenditure and for interest rate exposures and the the receivables relate to penalty charges. The are monitored against these limits on a regular Management Code) issued in 2009 for Treasury maturity profile of its borrowing. Group makes all reasonable attempts to recover basis. Deposit limits per institution on the Approved Management in the Public Services, the Local penalty charges before providing against them. Investment List, and the maximum term of deposits, Government Act 2003, the Capital Finance and TfL also agrees its maximum in-year incremental Other receivables include amounts due under are linked to the credit rating of the institution (in the Accounts Regulations 2003 and the fully revised borrowing capacity with Government as part of the contractual arrangements with suppliers, and range of A+ to AAA) from at least two credit rating second edition of CIPFA’s Prudential Code for Comprehensive Spending Review ‘funding settlement’. include prepayments for work to be performed. agencies (at the time of making the deposit). Capital Finance in Local Authorities (the Prudential These counterparties are assessed individually for Code) issued in 2009, in managing the financial risks their creditworthiness at the time of entering into faced by the Group. contract and termination provisions are included to mitigate the Group’s risk.

154 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 155 Notes to the Financial Statements (continued) Contents

33. Funding and financial risk programme and Commercial Paper programme and, 33. Funding and financial risk Inflation risk subject to meeting the relevant criteria, borrow The Group has a number of exposures to inflation management (continued) at competitive interest rates from the European management (continued) including staff pay awards and fares revenue. The Investment Bank. There is therefore no significant Group has not entered into any derivative instrument Financial Instruments risk that it will be unable to raise finance to meet its business plan, it is important to ensure future to manage its exposure to inflation risk. At present, The TfL Board authorises the policy for setting planned capital commitments. borrowing costs do not exceed business planning the risk is partially offset with index linked revenues counterparty limits. The Group and Corporation assumptions. Section 49 of the TfL Act 2008 confers and index linked costs creating a natural hedge spread their exposure over a number of The contractual maturities of the Group and upon TfL the powers to use financial instruments for within the Group. counterparties, and have strict policies on how much Company’s financial liabilities are listed later in risk management purposes only. exposure can be assigned to each counterparty. this note. Risk management In the year to 31 March 2011, the Group through The Group, through its wholly owned subsidiary its wholly owned subsidiary Transport for London The credit risk with regard to derivative financial Market risk Transport for London Finance Limited, uses Finance Limited entered into 11 forward fixing instruments is limited because TfL has arrangements Market risk is the risk that changes in market interest rate swaps (the hedging instrument) to contracts at a total notional value of £500m. The in place which limit each bank to a threshold, which prices, such as foreign exchange rates, interest reduce exposure to interest rates movements (the net fair value of these contracts at 31 March 2011 if breached, allows TfL to require the bank to post rates and equity prices will affect the Group’s hedged risk) on highly probable future borrowings was £4.4m. The maturity of these forward fixing collateral in cash or eligible securities in the event income, expenditure or the value of its holdings (the hedged item) that will be issued in the period contracts is disclosed later in this note. that the financial strength of the institution has of financial instruments. from 20 October 2011 to 30 May 2023. The Group deteriorated from when the limits were approved. does not use derivative financial instruments for The Group is also exposed to interest rate risk in Foreign exchange risk speculative purposes. respect to its investments. Investments are made Guarantees The Group has no financial assets or liabilities in accordance with the Investment Strategy, which The Corporation provides guarantees to third denominated in foreign currencies and thus has The amounts held in the hedging reserve are prioritises security and liquidity over yield. parties under Section 160 of the GLA Act, which are no translation exposure to gains or losses arising expected to impact the Comprehensive Income and deemed necessary for the fulfilment of its policies. from movements in exchange rates. For 2010/11, Expenditure Statement over the period 20 October The Group’s policy is to recognise guarantees at fair the broad policy on managing transactional foreign Sensitivity analysis on interest rate risk 2011 to 30 May 2023. value initially and amortise this over the life of the exchange risk related to contractual obligations with Fair value sensitivity analysis for fixed All derivatives held during the year are designated in guarantee. Where indications are that a payment is overseas providers was to pass the exchange risk to interest instruments a highly effective hedge relationship. If a derivative likely to occur under a guarantee, this is accounted the vendor. Changes in the market interest rates of for as a provision, in accordance with the Code. non-derivative financial instruments with fixed should no longer satisfy the hedging criteria in accordance with IAS 39 it is no longer hedge Where funds were received in specific currencies in interest rates only affect income if these are accounted for and is fair valued immediately Liquidity risk which the group expected to have future exposures, measured at their fair value. As such, all financial through the Comprehensive Income and Liquidity risk is the risk that the Group will not be the Investment Strategy made allowances to place instruments with fixed rates of interest that are Expenditure Statement. able to meet its financial obligations as they fall these funds on deposit. This gave the group the accounted for at amortised cost are not subject due. The Group’s approach to managing liquidity is flexibility to offer certain payments in specific to interest rate risk as defined in IFRS 7 Financial Instruments: Disclosures (‘IFRS 7’). All derivatives are designated as hedges. Those to ensure, as far as possible, that it will always have foreign currencies where required. derivatives that do not satisfy the hedging criteria sufficient liquidity to meet its liabilities when due, Fair value sensitivity analysis for in accordance with adopted IAS 39 Financial under both normal and stressed conditions, without Interest rate risk derivative instruments Instruments: Recognition and measurement (‘IAS incurring unacceptable losses or risking damage to As at 31 March 2011, 93 per cent of the Group’s The group holds derivative contracts with a nominal 39’) are not hedge accounted for and are fair valued the Group’s reputation. borrowings were at fixed rates of interest. The value of £500m as at 31 March 2011 (2010 £nil) immediately through the Comprehensive Income remaining seven per cent was Commercial Paper which are designated as cash flow hedges. and Expenditure Statement. The Corporation manages liquidity risk by which, although has fixed rates of interest for the maintaining access to a number of sources of duration of the note, in practice behaves more like The Group has a comprehensive risk management An increase/(decrease) of 100 basis points in interest funding which are sufficient to meet anticipated variable rate debt if used on a revolving basis. process. The Board of Transport for London, rates would increase/(decrease) the fair value of the funding requirements. As long as the affordable through a sub-committee (the Finance and Policy derivative instruments by £27.8m/(£27.7m). borrowing limit set by the Mayor is not exceeded, The Group is mainly exposed to interest rate risk on Committee) has approved and monitors the risk the Corporation is able to borrow from the Public its planned future borrowings, which are agreed with management processes, including documented Works Loan Board, raise debt on the capital markets Government as part of the funding settlement. As treasury policies, counterparty limits, controlling and through both its established Medium Term Note TfL is required by legislation to produce a balanced reporting structures.

156 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 157 Notes to the Financial Statements (continued) Contents

33. Funding and financial risk management (continued) 33. Funding and financial risk management (continued)

The use of derivative instruments can give rise to credit and market risk. Market risk is the possibility Contractual maturity of financial liabilities that future changes in interest rates may make a derivative more or less valuable. Since the Group uses The following table details the Group and the Corporation’s remaining contractual maturity for its financial derivatives for risk management, market risk relating to derivative instruments will principally be offset by liabilities (excluding derivatives). The table has been drawn up on the undiscounted cash flows of financial changes in the cash flows of the transactions being hedged. liabilities based on the earliest date on which the Group can be required to pay and, therefore differs from For the year ended 31 March 2011, no ineffectiveness has been recognised and all derivatives have been the carrying value and the fair value. The table includes both interest and principal cash flows. assessed as highly effective. Accordingly, the movement in the fair value of the derivatives has been taken to reserves. Less than Between two More than Maturity profile of Interest rate swaps one year and five years five years Total The interest rate derivatives have the following maturities: £m £m £m £m Group – 2011

2011 2010 Trade and other creditors 1,956.8 55.6 - 2,012.4 Fair Value Notional amount Fair value Notional amount Borrowings - principal 494.9 419.7 5,436.1 6,350.7 £m £m £m £m Borrowings - interest 281.8 1,075.9 4,343.6 5,701.3 Less then one year - - - - Finance lease liabilities 170.1 685.9 1,651.1 2,507.1 Between two and five years - - - - 2,903.6 2,237.1 11,430.8 16,571.5 After five years 4.4 500.0 - - Group – 2010 4.4 500.0 - - Trade and other creditors 1,720.0 38.1 - 1,758.1 Borrowings - principal - - 4,125.5 4,125.5 TfL was conferred the legal powers to enter into The following table details the Group’s remaining Borrowings - interest 183.6 734.5 3,976.1 4,894.2 derivatives for the purpose of risk mitigation via a contractual maturities for its interest rate swaps. Finance lease liabilities 640.2 2,424.3 1,827.2 4,891.7 qualifying subsidiary, Transport for London Finance The table has been drawn up on the undiscounted 2,543.8 3,196.9 9,928.8 15,669.5 Limited. The Corporation does not have the legal cash inflows/(outflows) of the net payments for the Corporation – 2011 powers to enter into derivative transactions. interest rate swaps. Trade and other payables 514.9 23.7 - 538.6 2011 2010 Overdraft 1.5 - - 1.5 £m £m Borrowings - principal 494.9 419.7 5,436.1 6,350.7 Less then one year (0.2) - Borrowings - interest 281.8 1,075.9 4,343.6 5,701.3 Between two and five years (3.7) - Finance lease liabilities 16.2 64.1 216.7 297.0 After five years 10.7 - 1,309.3 1,583.4 9,996.4 12,889.1 6.8 - Corporation – 2010 Trade and other payables 387.5 10.8 - 398.3 Overdraft - - - - The total asset or liability due to TfL under the interest rate swaps is the fair value, as this represents the cost to terminate. At 31 March 2011, the fair value of the interest rate swaps was an asset of £4.4m Borrowings - principal - - 4,125.5 4,125.5 (2010 £nil). Borrowings - interest 183.6 734.5 3,976.1 4,894.2 Finance lease liabilities 15.9 63.0 234.1 313.0 587.0 808.3 8,335.7 9,731.0

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33. Funding and Financial risk management (continued) 34. Financial commitments

Fair values a) Operating leases – The Group as lessee The fair values of financial assets and liabilities of the Group determined in accordance with IAS 39, together with the carrying amounts recorded in the balance sheets are: The Group operating lease agreements primarily relate to office space, motor vehicles and rail access. All leases have been entered into on commercial terms. 2011 2010 Carrying 2001 Carrying 2010 The Group is committed to the following future minimum lease payments under non-cancellable value Fair value value Fair value £m £m £m £m operating leases: Cash and cash equivalents 54.1 54.1 36.9 36.9 Short term investments 2,012.7 2,012.7 1,472.5 1,472.5 Land and Rail Motor buildings access vehicles Other Total Trade and other debtors 607.3 607.3 646.6 646.6 £m £m £m £m £m Derivative financial instruments 4.9 4.9 - - At 31 March 2011 Total financial assets 2,679.0 2,679.0 2,156.0 2,156.0 Within one year 53.5 7.8 5.4 15.5 82.2 Trade and other creditors 2,012.4 2,012.4 1,758.1 1,758.1 Between one and five years 178.7 15.2 4.3 64.8 263.0 Borrowings 6,386.7 6,170.6 4,117.8 4,079.0 Later than five years 519.2 36.4 - 182.1 737.7 Finance lease liabilities 1,419.0 1,419.0 3,355.8 3,355.8 751.4 59.4 9.7 262.4 1,082.9 Derivative financial instruments 0.5 0.5 - - At 31 March 2010 Total financial liabilities 9,818.6 9,602.5 9,231.7 9,192.9 Within one year 52.9 8.3 1.9 15.2 78.3 Net financial liabilities (7,139.6) (6,923.5) (7,075.7) (7,036.9) Between one and five years 173.4 20.2 2.9 65.9 262.4 Later than five years 551.8 27.2 - 201.7 780.7 The fair values of financial assets and liabilities of the Corporation determined in accordance with IAS 39, 778.1 55.7 4.8 282.8 1,121.4 together with the carrying amounts recorded in the balance sheet are:

2011 2010 Carrying 2011 Carrying 2010 value Fair value value Fair value £m £m £m £m Cash and cash equivalents - - - - Short term investments 1,978.9 1,978.9 1,427.8 1,427.8 Trade and other debtors 5,617.0 5,617.0 3,429.2 3,429.2 Total financial assets 7,595.9 7,595.9 4,857.0 4,857.0 Trade and other creditors 538.6 538.6 398.3 398.3 Borrowings and overdraft 6,343.8 6,053.5 4,117.8 4,079.0 Finance lease liabilities 202.3 202.3 209.2 209.2 Total financial liabilities 7,084.7 6,794.4 4,725.3 4,686.5 Net financial assets 511.2 801.5 131.7 170.5

160 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 161 Notes to the Financial Statements (continued) Contents

34. Financial commitments (continued) 34. Financial commitments (continued) b) Operating leases – The Group as lessor c) Operating leases – The Corporation as lessee The Corporation operating lease agreements primarily relate to office space and motor vehicles. All leases The Group leases out commercial, retail and office property, rail access and land that it holds as a result have been entered into on commercial terms. of its infrastructure holdings. The Corporation is committed to the following future minimum lease payments under non-cancellable At the balance sheet date, the Group had contracted with customers for the following future minimum operating leases at 31 March 2011: lease payments:

Land and buildings Rail access Motor vehicles Total £m £m £m £m Land and buildings Motor vehicles Total £m £m £m At 31 March 2011 At 31 March 2011 Within one year 40.8 4.3 0.2 45.3 Within one year 23.4 0.2 23.6 Between one and five years 118.5 9.3 0.2 128.0 Between one and five years 78.5 0.2 78.7 Later than five years 454.8 27.3 - 482.1 Later than five years 206.1 - 206.1 614.1 40.9 0.4 655.4 308.0 0.4 308.4 At 31 March 2010 At 31 March 2010 Within one year 38.6 6.9 0.7 46.2 Within one year 25.6 0.2 25.8 Between one and five years 114.9 12.2 1.1 128.2 Between one and five years 83.9 0.2 84.1 Later than five years 453.7 32.0 - 485.7 Later than five years 224.0 - 224.0 607.2 51.1 1.8 660.1 333.5 0.4 333.9

162 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 163 Notes to the Financial Statements (continued) Contents

34. Financial commitments and contingencies (continued) 36. Private Finance high speed data transmission system which achieved system live on 28 December 2008. d) Operating leases – The Corporation as lessor Initiative contracts The contract also includes the ongoing The Corporation leases out commercial, retail and office property and land that it holds as a result of its management and maintenance of the system infrastructure holdings. Private Finance Initiative contracts during the contract period. accounted for under IFRIC 12 service At the balance sheet date, the Corporation had contracted with customers for the following future minimum concession arrangements: LUL retains ownership of the assets constructed on this contract. lease payments: The Group is party to the following Private Finance Initiative (‘PFI’) arrangements where the Group The contract requires LUL to make an annual controls the use of the infrastructure and the unitary payment which is adjusted for indexation Land and residual interest in the infrastructure at the end and performance as specified in the contract. LUL buildings Total of the arrangement. These arrangements are has a voluntary break option subject to at least £m £m treated as service concession arrangements and are 12 months written notice. At 31 March 2011 accounted for in accordance with IFRIC 12 Service concession arrangements (‘IFRIC 12’). Within one year 3.1 3.1 Power Between one and five years 11.4 11.4 The Group therefore recognises PFI assets as The Power contract is for the maintenance, Later than five years 17.6 17.6 items of plant, property and equipment together management and procurement of the electricity supply services for the London Underground. The 32.1 32.1 with a liability to pay for them. The fair values of services received under the contract are recorded contract started on 13 August 1998 and is due to At 31 March 2010 as operating expenses. end on 13 August 2028. Within one year 2.9 2.9 Between one and five years 10.6 10.6 In accordance with IFRIC 12, the unitary charge is The contract required the completion of capital works on the Emergency Supply Plan Later than five years 19.7 19.7 apportioned between the repayment of the liability, financing costs and charges for services. The and the Northern Line Power Upgrade. It took 33.2 33.2 service is recognised as an expense in net operating approximately five years for this work to be costs and the finance costs are charged to financial completed at which point the assets were expenses in the Comprehensive Income and transferred to LUL. The contract also included Expenditure Statement. management and maintenance of the infrastructure 35. Contingencies are monitored to ensure that, where a possible and the procurement of services. There are a number of uncertainties surrounding obligation has become probable or a transfer Connect of economic benefits has become probable, a projects, including claims in the course of The Connect contract is for the provision LUL retains ownership of the assets constructed on provision is made. negotiations, which may affect the Group’s financial of network wide, integrated radio and this contract. performance. Where claims are possible but not transmission communication services to The impact of these contingent liabilities on the probable, or unquantifiable, such claims are treated London Underground Limited (‘LUL’). The The contract requires LUL to make an annual Group’s financial performance, liquidity or financial as contingent liabilities. Contingent liabilities are contract started on 22 November 1999 and unitary payment. It is charged monthly and adjusted position is not considered to be material. not recognised in the financial statements, but will end on 22 November 2019. for any penalties relating to adverse performance against output measures describing all relevant The contract required the design and installation aspects of the contract. of a new integrated digital radio system using a

164 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 165 Notes to the Financial Statements (continued) Contents

36. Private Finance Initiative The City Airport contract commenced on 36. Private Finance Initiative contracts (continued) 25 February 2003 and is due to terminate on contracts (continued) 25 February 2033. The construction of the Assets held under PFI arrangements extension was completed on 5 December 2005, Group Group Corporation Corporation which is when the line became operational. 2011 2010 2011 2010 British Transport Police £m £m £m £m (London Underground) DLR retains ownership of the assets constructed on Cost or valuation The British Transport Police (‘BTP’) contract is these contracts. At 1 April 1,488.7 1,699.2 225.8 225.8 to provide improved operational infrastructure Disposals - (210.5) - - to support efficient policing of the Jubilee Line DLR has voluntary break options for the Woolwich Extension and the delivery of the long-term policing and City Airport contracts, but not the City At 31 March 1,488.7 1,488.7 225.8 225.8 strategy for LUL. The contract also includes the Greenwich contract. The notice period for Depreciation ongoing management and maintenance during the Woolwich and City Airport is 30 days and for At 1 April 229.7 313.4 51.6 42.2 contract period. The contract started on 26 March Woolwich there is also the ability to terminate the Charge for the year 64.2 64.3 9.4 9.4 1999 and is due to end on 26 March 2021. agreement on two specific dates. Disposals - (148.0) - - At 31 March 293.9 229.7 61.0 51.6 LUL retains ownership of the assets constructed The contracts require DLR to make payments, on this contract. which are charged monthly and adjusted for any Net book value penalties relating to adverse performance against At 31 March 2011 1,194.8 164.8 The contract requires LUL to make a base annual output measures describing all relevant aspects of At 31 March 2010 1,259.0 174.2 unitary payment which is adjusted for indexation the contract. and performance as specified in the contract. LUL At 1 April 2009 1,385.8 183.6 has a voluntary break option subject to at least 12 months written notice. A13 Thames Gateway contract PFI finance lease liabilities The A13 Thames Gateway Design Build Finance Group Group Corporation Corporation and Operate (‘DBFO’) contract is for the design 2011 2010 2011 2010 Docklands Light Railway contracts for and construction of improvements to the A13. £m £m £m £m Woolwich, Greenwich and City Airport In addition to major improvements the contract At 1 April 1,099.0 1,267.9 209.1 214.8 The Docklands Light Railway Limited (‘DLR’) included the operation and maintenance of the Payments (124.7) (257.4) (15.8) (15.0) contracts are for the design, construction and A13 between Butcher Row and Wennington and maintenance of the three extensions to the the design and construction of a communications Interest 75.6 88.5 9.1 9.3 Docklands Light Railway (‘DLR’) being Woolwich, system and a traffic signals system for the A13 At 31 March 1,049.9 1,099.0 202.4 209.1 Greenwich and City Airport. between Butcher Row and Wennington. The contract started on 20 April 2000 and is due to end The Woolwich contract commenced on 31 May on 20 April 2030. 2005 and is due to terminate on 31 May 2035. The construction of the extension was completed The contract requires TfL to make an annual unitary on 10 January 2009, which is when the line payment. It is charged monthly and is calculated became operational. according to the service provided by the DBFO Company and the payment mechanisms defined in The Greenwich contract commenced on 1 October the contract. 1996 and is due to terminate on 1 April 2021. The construction of the extension was completed on 20 November 1999, which is when the line became operational.

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36. Private Finance Initiative contracts (continued) 36. Private Finance Initiative contracts (continued) Group Amounts payable under the PFI arrangements cover payments for repayment of capital, payments of interest and payment of service charges. The total amount payable breaks down as follows: Total amount payable under non-cancellable PFI arrangements: Group Group Group Repayment of capital 2011 2010 2009 £m £m £m 2011 2010 2009 £m £m £m Less than 1 year 238.0 231.2 486.4

Less than 1 year 53.5 49.1 168.9 Between 1 to 5 years 995.5 974.9 956.6 Between 1 to 5 years 271.2 247.8 226.4 Between 5 to 10 years 1,107.0 1,221.1 1,249.0 Between 5 to 10 years 298.2 351.0 361.9 Between 10 to 15 years 750.5 739.4 807.2 Between 10 to 15 years 159.3 142.4 163.2 Between 15 to 20 years 549.0 650.9 728.9 Between 15 to 20 years 187.0 199.7 208.2 Between 20 to 25 years 141.5 195.2 271.1 Between 20 to 25 years 80.7 109.0 139.3 3,781.5 4,012.7 4,499.2 1,049.9 1,099.0 1,267.9 Corporation Amounts payable under the PFI arrangements cover payments for repayment of capital, payments Payments of interest of interest and payment of service charges. The total amount payable breaks down as follows:

2011 2010 2009 Repayment of capital £m £m £m 2011 2010 2009 Less than 1 year 72.6 75.7 88.7 £m £m £m Between 1 to 5 years 254.1 269.5 283.4 Less than 1 year 7.5 6.8 5.7 Between 5 to 10 years 217.5 239.2 261.8 Between 1 to 5 years 32.3 29.8 29.7 Between 10 to 15 years 150.4 160.7 171.6 Between 5 to 10 years 51.4 52.3 48.1 Between 15 to 20 years 77.9 93.5 109.6 Between 10 to 15 years 65.4 59.0 54.6 Between 20 to 25 years 16.6 26.2 38.4 Between 15 to 20 years 45.8 60.4 71.7 789.1 864.8 953.5 Between 20 to 25 years - 0.8 5.0 202.4 209.1 214.8 Payments for service charges

2011 2010 2009 Payments of interest £m £m £m 2011 2010 2009 Less than 1 year 111.9 106.4 228.8 £m £m £m Between 1 to 5 years 470.2 457.6 446.8 Less than 1 year 8.8 9.1 9.3 Between 5 to 10 years 591.3 630.9 625.3 Within 1 to 5 years 31.9 33.2 34.5 Between 10 to 15 years 440.8 436.3 472.4 Within 5 to 10 years 30.8 33.1 35.2 Between 15 to 20 years 284.1 357.7 411.1 Within 10 to 15 years 19.2 21.8 24.1 Between 20 to 25 years 44.2 60.0 93.4 Within 15 to 20 years 3.9 6.6 9.7 1,942.5 2,048.9 2,277.8 Within 20 to 25 years - - 0.3 94.6 103.8 113.1

168 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 169 Notes to the Financial Statements (continued) Contents

37. Related parties (continued) Transport Grant is paid by the Department for 36. Private Finance Initiative contracts (continued) Transport to the Greater London Authority, which in turn pays the grant to the Corporation. Payments for service charges Disclosure of related party transactions allows Details of Transport Grant are disclosed in the readers to assess the extent to which the Corporation 2011 2010 2009 Corporation and Group Comprehensive Income £m £m £m might have been constrained in its ability to operate and Expenditure Statements and Cash Flow independently or might have secured the ability to Statements and in note nine and are therefore not Less than 1 year 9.9 9.9 10.3 limit another party’s ability to bargain freely with it. included in this note. Between 1 to 5 years 53.1 46.6 43.1 Most of the transactions between these parties are Between 5 to 10 years 101.9 95.6 86.4 During 2010/11 there were no other reported elsewhere in the Statement of Accounts. material related party transactions except as Between 10 to 15 years 152.6 143.7 134.8 disclosed below. Between 15 to 20 years 110.3 140.1 149.9 The Accounts of the TfL Pension Fund are Between 20 to 25 years - 1.8 23.4 prepared separately and are subject to a separate audit opinion. 427.8 437.7 447.9

Total income Total expenditure Outstanding balance during the year during the year at 31 March 2011 Total amount payable under non-cancellable PFI arrangements: £m £m £m 2011 2010 2009 Greater London Authority (GLA) 2.7 5.2 167.0 £m £m £m Metropolitan Police Authority (MPA) 0.3 89.0 (15.7) Less than 1 year 26.2 25.8 25.3 London Development Agency (LDA) 5.3 0.2 (3.2) Within 1 to 5 years 117.3 109.6 107.3 London Fire and Emergency Planning Authority (LFEPA) 0.3 - 0.1 Within 5 to 10 years 184.1 181.0 169.7 Within 10 to 15 years 237.2 224.5 213.5 Transactions between the Corporation and it subsidiaries, which are related parties, have been eliminated Within 15 to 20 years 160.0 207.1 231.3 on consolidation and are not disclosed in this note. Within 20 to 25 years - 2.6 28.7 724.8 750.6 775.8 Board Members, Chief Officers, the Commissioner and the Mayor of London are required to complete a declaration regarding any related party transactions. During the year, none of the Corporation Board, key management personnel or parties related to them have undertaken any material transactions with the Corporation or its subsidiaries (2009/10 none). 37. Related parties TfL is a statutory corporation established by section 154 of the Greater London Authority Act sheet at 1 April 2009 (both the Corporation’s 1999 (GLA Act 1999). It is a functional body of the 38. Conversion to International Transport for London is required by the Code and and Group’s date of transition). IAS 24 Related party transactions (“IAS 24”) to Greater London Authority and is controlled by the Financial Reporting Standards Mayor of London. TfL is classified as a government disclose material transactions with related parties. In preparing their opening IFRS balance sheet, entity in accordance with IAS 24, as it is controlled Related parties are entities or individuals who As stated in the accounting policies, these are both both the Corporation and the Group have by the GLA, through the Mayor. The GLA and have the potential to control, indirectly control the Corporation’s and the Group’s first financial adjusted amounts reported previously in financial its other functional bodies are considered to be or significantly influence TfL or to be controlled, statements prepared in accordance with the Code. statements prepared in accordance with UK GAAP. related parties of TfL and its subsidiaries, as they indirectly controlled or significantly influenced An explanation of how the transition from the are all under the control of the Mayor. Other by TfL. The accounting policies have been applied Statement of Recommended Practice for Local related parties include TfL’s Board Members, Chief in preparing the financial statements for the Authorities 2009/10 to the IFRS based Code for Officers, Commissioner and the Mayor of London year ended 31 March 2011, the comparative 2010/11 has affected both the Corporation and the and the TfL Pension Fund. information presented in these financial Group’s financial position and financial performance statements for the year ended 31 March 2010 is set out in the following tables and the notes that and in the preparation of an opening IFRS balance accompany the tables.

170 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 171 Notes to the Financial Statements (continued) Contents

38. Conversion to International Financial Reporting Standards 38. Conversion to International Financial Reporting Standards (continued) (continued) a) Explanation of transition to IFRS-based Code - Group a) Explanation of transition to IFRS-based Code - Group Reconciliation of net assets as at 1 April 2009 (date of transition to IFRS) Reconciliation of net assets as at 31 March 2010 (last date of UK GAAP financial statements) UK GAAP Reclassified IFRS transition IFRS-based IFRS transition IFRS-based effect Code UK GAAP Reclassified effect code note £m £m £m £m note £m £m £m £m Non-current assets Non-current assets Intangible assets i - - 51.8 51.8 Intangible assets i - - 162.3 162.3 Property, plant and equipment i, ii, iii 19,456.0 - 129.3 19,585.3 Property, plant and equipment i, ii, iii 21,629.1 - 22.6 21,651.7 Investment properties iii - - 355.5 355.5 Investment properties iii - - 294.5 294.5 Long-term debtors - 3.6 - 3.6 Long-term debtors - 39.5 - 39.5 19,456.0 3.6 536.6 19,996.2 21,629.1 39.5 479.4 22,148.0 Current assets Current assets Inventories 20.2 - - 20.2 Inventories 18.3 - - 18.3 Short-term debtors ii 488.4 (3.6) (9.3) 475.5 Short-term debtors ii 698.6 (39.4) (52.1) 607.1 Cash and cash equivalents 34.1 - - 34.1 Cash and cash equivalents 36.9 - - 36.9 Short-term investments 1,967.8 - - 1,967.8 Short-term investments 1,472.5 - - 1,472.5 2,510.5 (3.6) (9.3) 2,497.6 2,226.3 (39.4) (52.1) 2,134.8 Current liabilities Current liabilities Short-term creditors ii, iv (2,079.2) 368.7 (78.4) (1,788.9) Short-term creditors ii, iv (2,067.1) 388.5 (41.4) (1,720.0) Short-term finance lease liabilities ii - (368.7) 12.3 (356.4) Short-term finance lease liabilities ii - (389.0) (9.0) (398.0) Short-term provisions - (46.3) - (46.3) Short-term provisions - (294.9) - (294.9) (2,079.2) (46.3) (66.1) (2,191.6) (2,067.1) (295.4) (50.4) (2,412.9) Non-current liabilities Non-current liabilities Long-term creditors ii (2,519.5) 2,488.2 (5.7) (37.0) Long-term creditors ii (2,581.2) 2,549.7 (6.6) (38.1) Long-term borrowings (3,017.6) - - (3,017.6) Long-term borrowings (4,117.8) - - (4,117.8) Long-term finance lease liabilities ii - (2,488.7) (416.8) (2,905.5) Long-term finance lease liabilities ii - (2,550.0) (407.8) (2,957.8) Long-term provisions (193.8) 86.8 - (107.0) Long-term provisions (617.2) 346.7 - (270.5) Deferred grants v (8,216.2) - 8,216.2 - Deferred grants v (9,710.5) - 9,710.5 - Retirement benefit obligation (1,147.5) (40.0) - (1,187.5) Retirement benefit obligation (2,142.6) (51.1) - (2,193.7) (15,094.6) 46.3 7,793.7 (7,254.6) (19,169.3) 295.3 9,296.1 (9,577.9) Net assets 4,792.7 - 8,254.9 13,047.6 Net assets 2,619.0 - 9,673.0 12,292.0 Reserves Reserves Usable reserves iv 1,308.0 12.5 (1.6) 1,318.9 Usable reserves iv 1,031.8 11.1 (1.4) 1,041.5 Unusable reserves i, ii, iii, iv, v 3,484.7 (12.5) 8,256.5 11,728.7 Unusable reserves i, ii, iii, iv, v 1,587.2 (11.1) 9,674.4 11,250.5 Total reserves 4,792.7 - 8,254.9 13,047.6 Total reserves 2,619.0 - 9,673.0 12,292.0

172 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 173 Notes to the Financial Statements (continued) Contents

38. Conversion to International Financial Reporting Standards 38. Conversion to International Financial Reporting Standards (continued) (continued) a) Explanation of transition to IFRS-based Code – Group b) Explanation of transition to IFRS-based Code - Corporation Reconciliation of the Comprehensive Income and Expenditure Statement for the year ended 31 March 2010 Reconciliation of equity as at 1 April 2009 (date of transition to IFRS) UK IFRS transition IFRS-based IFRS transition IFRS-based GAAP Reclassified Effect Code Note UK GAAP Reclassified effect Code Note £m £m £m £m £m £m £m £m

Gross income ii 3,594.3 - 0.7 3,595.0 Non-current assets Gross expenditure i, ii, iii, iv, v (5,676.5) - (431.5) (6,108.0) Intangible assets i - - 43.8 43.8 Property, plant and equipment i, ii, iii 2,866.4 - (122.5) 2,743.9 Net cost of services (2,082.2) - (430.8) (2,513.0) Investment properties iii - 76.4 76.4 Other operating expenditure iii, v (14.5) - (90.7) (105.2) Other investments 22.5 - - 22.5 Financing and investment income iii, iv 13.9 241.1 30.3 285.3 Long-term debtors 2,184.9 - - 2,184.9 Financing and investment expenditure ii (390.7) (339.8) (30.5) (761.0) 5,073.8 - (2.3) 5,071.5 Pensions interest cost and expected return on (98.7) 98.7 - - Current assets pension assets Inventories 2.7 - - 2.7 Non-specific grant income v 1,367.6 - 1,970.2 3,337.8 Short-term debtors 206.9 3.5 - 210.4 Surplus/(deficit) on the provision of services (1,204.6) - 1,448.5 243.9 Cash and cash equivalents 11.2 - - 11.2 Surplus/(deficit) on revaluation of property, plant iii 32.8 - (30.4) 2.4 Short-term investments 1,925.8 - - 1,925.8 and equipment 2,146.6 3.5 - 2,150.1 Actuarial losses on defined benefit pension schemes (1,001.9) - - (1,001.9) Current liabilities (2,173.7) - 1,418.1 (755.6) Short-term creditors iv (476.2) 1.4 (5.7) (480.5) Prior year adjustments ii, iii, iv, v - - 8,254.9 8,254.9 Short-term finance lease liabilities - (5.7) - (5.7) Total comprehensive income and expenditure (2,173.7) - 9,673.0 7,499.3 Short-term provisions - (29.1) - (29.1) (476.2) (33.4) (5.7) (515.3) Non-current liabilities Long-term creditors (220.2) 209.4 - (10.8) Long-term borrowings (3,017.6) - - (3,017.6) Long-term finance lease liabilities - (209.1) - (209.1) Long-term provisions (77.8) 53.2 - (24.6) Deferred grants v (724.0) - 724.0 - Retirement benefit obligation (17.3) (23.6) - (40.9) (4,056.9) 29.9 724.0 (3,303.0) Net assets 2,687.3 - 716.0 3,403.3 Reserves Usable reserves iv 1,308.0 12.5 (1.6) 1,318.9 Unusable reserves iv, v 1,379.3 (12.5) 717.6 2,084.4 Total reserves 2,687.3 - 716.0 3,403.3

174 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 175 Notes to the Financial Statements (continued) Contents

38. Conversion to International Financial Reporting Standards 38. Conversion to International Financial Reporting Standards (continued) (continued) b) Explanation of transition to IFRS-based Code - Corporation (continued) b) Explanation of transition to IFRS-based Code – Corporation (continued) Reconciliation of equity as at 31 March 2010 (last date of UK GAAP financial statements) Reconciliation of the Comprehensive Income and Expenditure Statement for the year ended 31 March 2010 IFRS Transition IFRS-based UK GAAP Reclassified Effect Code IFRS transition IFRS-based Note £m £m £m £m Note UK GAAP Reclassified effect Code £m £m £m £m Non-current assets Gross income 447.2 - - 447.2 Intangible assets i - - 133.7 133.7 Gross expenditure iv ,v (1,065.6) - (40.5) (1,106.1) Property, plant and equipment i, ii, iii 3,285.2 - (155.3) 3,129.9 Net cost of services (618.4) - (40.5) (658.9) Investment properties iii - - 18.1 18.1 Other investments 22.5 - - 22.5 Other operating expenditure iii (4.3) - 1.5 (2.8) Long-term debtors 3,083.5 12.3 - 3,095.8 Financing and investment income iii 111.0 2.3 0.2 113.5 6,391.2 12.3 (3.5) 6,400.0 Financing and investment expenditure iii (175.6) (5.2) (1.5) (182.3) Current assets Pensions interest cost and expected return (2.9) 2.9 - - Inventories 2.3 - - 2.3 on pension assets Short term debtors 368.7 (35.3) - 333.4 Non-specific grant income v 1,367.6 - 1,819.6 3,187.2 Short term investments 1,427.8 - - 1,427.8 Non-specific grant expense v (1,099.3) - (1,805.6) (2,904.9) Cash and cash equivalents 7.0 - - 7.0 (Deficit) on the provision of services (421.9) - (26.3) (448.2) 1,805.8 (35.3) - 1,770.5 Surplus/(deficit) on revaluation of property, iii 1.6 - (1.6) - Current liabilities plant and equipment Short-term creditors iv (410.6) 29.5 (6.4) (387.5) Actuarial losses on defined benefit (31.2) - - (31.2) pension schemes Short-term finance lease liabilities - (6.8) - (6.8) Short-term provisions - (265.8) - (265.8) (451.5) - (27.9) (479.4) (410.6) (243.1) (6.4) (660.1) Prior year adjustments iv ,v - - 716.0 716.0 Non-current liabilities Total comprehensive income and expenditure (451.5) - 688.1 (236.6) Long-term creditors (212.7) 201.9 - (10.8) Long-term borrowings (4,117.8) - - (4,117.8) Long-term finance lease liabilities - (202.4) - (202.4) Long-term provisions (475.2) 294.4 - (180.8) Deferred grants v (698.0) - 698.0 - Retirement benefit obligation (46.9) (27.8) - (74.7) (5,550.6)) 266.1 698.0 (4,586.5) Net assets 2,235.8 - 688.1 2,923.9 Reserves Usable reserves iv 1,031.8 11.1 (1.4) 1,041.5 Unusable reserves iv, v 1,204.0 (11.1) 689.5 1,882.4

Total reserves 2,235.8 - 688.1 2,923.9

176 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 177 Notes to the Financial Statements (continued) Contents

38. Conversion to International Financial Reporting Standards 38. Conversion to International Financial Reporting Standards (continued) (continued) c) Reclassifications • in the case of the Corporation, the presentation ii) Leases Some of the adjustments to the Group and of balances with subsidiaries has been reviewed Determining whether an arrangement The review of the Group’s arrangements further Corporation Balance Sheets and Comprehensive and in some cases changed where further netting contains a lease identified an arrangement for the construction and Income and Expenditure Statements have been was appropriate. IFRIC 4 Determining whether an arrangement maintenance of the extension of the Piccadilly line disclosed under the heading ‘Reclassified’. This contains a lease (‘IFRIC 4’) states that when an entity to Heathrow airport where the Group had the right heading has been used where the IFRS based Code d) Explanation of transition to IFRS- enters into an arrangement that does not have the to the use of the extension conveyed to them. simply requires a different presentation of items based Code – Corporation and Group legal form of a lease but conveys the right to use an The review required under IAS 17 determined in the balance sheet or Comprehensive Income i) Intangible assets asset, then the entity should treat the asset as if it that the arrangement to use the extension was a and Expenditure Statement rather than there being has been separately leased. finance lease. IAS 38 Intangible Assets (‘IAS 38’) requires certain a change in the value of the underlying asset or assets that would be classified as tangible fixed liability as a result of a difference between an IFRS A review of the Group’s arrangements identified The payments relating to this arrangement were assets under UK GAAP (for example computer standard and the UK GAAP standard. Examples of that there was an arrangement for the provision of entirely contingent on passenger numbers which software costs), to be separately disclosed as such items are: rail transport services on the Northern line of the meant that the present value of the future minimum intangible assets. This reclassification does not London Underground where the Group had the right lease payments was £nil. No asset or finance affect the measurement of the assets (including • disclosure of long term debtors separately on the to use rolling stock conveyed to them. lease liability was recorded on the Balance Sheet in amortisation over their useful economic lives). face of the balance sheet relation to these assets. In accordance with IAS 17 Leases (‘IAS 17’) a review • disclosure of finance lease creditors separately on In the Group, this has resulted in £51.8m of of this arrangement was completed to determine The review of the Corporation’s arrangements did the face of the balance sheet, software costs being reclassified as intangible whether the arrangement to use the rolling stock not identify any assets that were under the scope • disclosure of pension interest amounts in the assets at 1 April 2009 and £161.3m of software should be classified as a finance lease or an of IFRIC 4. financing income and expense lines rather than costs being reclassified at 31 March 2010. These operating lease. their own line in the Comprehensive Income and costs were previously recorded as property, plant Lease incentives Expenditure Statement, and equipment. This review determined that the arrangement to use Under UK GAAP, lease incentives such as rent free the rolling stock was a finance lease and an asset of periods are spread over the period to the review date • ageing of provisions between short term and In the Corporation, this has resulted in £43.8m long term. £295.0m and finance lease creditor of £338.1m was on which the rent is first expected to be adjusted to of software costs being reclassified as intangible recognised at 1 April 2009. The value of the asset at the prevailing market rate. assets at 1 April 2009 and £133.7m of software 31 March 2010 was £285.2m and the finance lease In addition, the Group also used the transition to costs being reclassified at 31 March 2010. These the IFRS based Code to completely review the creditor was £329.2m. SIC 15 Lease incentives (‘SIC 15’) requires that lease costs were previously recorded as property, plant incentives are spread on a straight line basis over the presentation of every item in its balance sheet and in and equipment. one or two cases presentational improvements have Recognising this lease as a finance lease resulted in full lease term. been made. Examples of such items are: a £0.9m credit to the Comprehensive Income and Under UK GAAP, the purchased Oyster brand Expenditure Statement for the year to 31 March The impact at 1 April 2009 on the Group balance was expensed to the Income and Expenditure 2010 because capital repayments reclassified to sheet where the Group is the lessee was a decrease • unfunded pension defined benefit obligation which Statement but in accordance with IAS 38 the were disclosed within provisions are now shown the balance sheet were £0.9m higher than the in opening reserves of £3.0m and an increase of Oyster brand has been capitalised as an intangible depreciation charge on the newly recognised £3.0m to short-term creditors. In the year ended with the funded pension defined benefit obligation asset. This has resulted in an additional intangible so that the total pension defined benefit obligation assets. £28.2m of costs were also reclassified from 31 March 2010 there was a £1.6m increase to gross asset of £1.0m for the Group at 31 March 2010 operating costs to financing costs during the year to expenditure which resulted in an increase of £4.6m can be seen more clearly. This also resulted in a (£nil in the Corporation). change to the pension reserve (reclassification 31 March 2010 representing interest charges on the in short-term creditors at 31 March 2010 compared from earmarked reserves). finance lease. to UK GAAP.

178 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 179 Notes to the Financial Statements (continued) Contents

38. Conversion to International Financial Reporting Standards 38. Conversion to International Financial Reporting Standards (continued) (continued) The impact at 1 April 2009 on the Group balance In the Corporation this has resulted in £76.4m of The main difference between IAS 19 and FRS 17 In the Corporation, this resulted in £724.0m of sheet where the Group is the lessor was an increase property, plant and equipment being reclassified as Retirement benefits (‘FRS 17’) is in relation to the deferred grant being transferred to reserves on 1 in opening reserves of £1.6m and an increase of investment properties at 1 April 2009 and £18.1m of classification of expenses. This resulted in service April 2009 and £698.0m being transferred at 31 £1.6m to short-term debtors. In the year ended property, plant and equipment being reclassified as costs decreasing by £8.9m and interest receivable March 2010. 31 March 2010 there was a £0.7m increase to gross investment properties at 31 March 2010. decreasing by £8.9m. income which resulted in an increase of £2.3m in The changes to grant recognition results in a short-term debtors at 31 March 2010 compared to Gains or losses on revaluation of investment v) Grants £1,494.3m net credit to the Comprehensive Income UK GAAP. property are required to be recorded in the Under UK GAAP and IAS 20 Accounting for and Expenditure Statement in 2010. This is a result Comprehensive Income and Expenditure Statement. Government Grants (‘IAS 20’) capital grants and of recognising grant income of £1,970.2m but In the Corporation there were no differences For the year ended 31 March 2010, the Group other contributions received towards the cost removing grant amortisation of £398.6m and grant between the accounting treatment for lease recognised gains on revaluation of investment of capital expenditure are recorded as deferred disposals of £77.3m which were recognised in the incentives under UK GAAP and SIC 15. property of £25.8m and the Corporation recognised grant on the Balance Sheet and released to the Comprehensive Income and Expenditure Statement gains of £0.2m. Comprehensive Income and Expenditure Statement under UK GAAP. iii) Investment properties over the estimated useful economic life of the asset IAS 40 Investment properties (‘IAS 40’) requires iv) Employee benefits to which the grant relates. The effect on the Comprehensive Income and investment properties to be disclosed separately IAS 19 Employee Benefits (‘IAS 19’) requires the Expenditure Statement in 2010 was a net expense and accounted for at fair value. cost of short-term compensated absences to be The Code makes a departure from IFRS and IAS 20 of £26.0m resulting from the recognition of £14.0m recognised when employees render the services that by requiring a policy to be adopted whereby capital of capital grants in the Comprehensive Income and In the Group this has resulted in £262.7m of increase their entitlement. grants and contributions are recognised immediately Expenditure Statement and the removal of £40.0m property, plant and equipment being reclassified as in the Comprehensive Income and Expenditure of grant amortisation. investment properties at 1 April 2009 and £207.6m In the Group this resulted in an accrual of £33.3m Statement once there is reasonable assurance that of property, plant and equipment being reclassified being recorded at 1 April 2009. An increase of £2.5m all conditions relating to those grants have been met. as investment properties at 31 March 2010. In in the accrual was recorded in the Comprehensive Because, there are no deferred grants on the balance addition, a review of the whole property portfolio Income and Expenditure Statement for the year sheet, there can be no grant releases (amortisation was performed and certain properties (generally ended 31 March 2010 resulting in an accrual of or grant disposals) through the Comprehensive attached to underground stations) were identified £35.8m being recorded at 31 March 2010. Income and Expenditure Statement under the Code. which had not been revalued in the past and which met the new definition of investment property. In the Corporation this resulted in an accrual of In the Group, this resulted in £8,216.2m of deferred Valuations for these properties were obtained for £4.1m being recorded at 1 April 2009. An increase grant being transferred to reserves on 1 April 2009 both years and this resulted in £92.7m of additional of £0.9m in the accrual was recorded in the and £9,710.5m being transferred at 31 March 2010. investment properties being recognised in 2009 and Comprehensive Income and Expenditure Statement £87.0m in 2010. This resulted in a £92.7m increase for the year ended 31 March 2010 resulting in an in Group reserves at 1 April 2009 and £87.0m at accrual of £4.9m being recorded at 31 March 2010. 31 March 2010.

180 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 181 Notes to the Financial Statements (continued) Contents

39. Guarantees 40. Events after the balance sheet date Section 160 of the Greater London Authority Approximate maximum amount of debt available for There have been no events occurring after the Act 1999 sets out the conditions under which TfL drawdown under the relevant debt facilities as part reporting date that would have a material impact on may give certain guarantees, indemnities or of the: these financial statements. similar arrangements. £m Agreement with City Link 502 TfL and its subsidiaries have entered into a joint and Agreement with Canary Wharf several guarantees in favour of HSBC Bank plc as Properties (Crossrail) Limited 500 security for any bank indebtedness outstanding from Agreement with QW Rail Leasing Ltd 290 time to time. TfL gave the guarantee under section Agreement with WARE 218 160(1) of the Greater London Authority Act 1999. Agreement with PADCo and EDF Energy Powerlink Ltd 168 TfL has given guarantees in respect of some of its Agreement with CARE 164 subsidiary companies’ contracts. The amount that Agreement with Pittville Leasing Limited 51 could be payable by TfL under the guarantees (as Agreement with APSLL 4 described below) varies depending on a number of factors, including, inter alia, responsibility for TfL also guarantees LU termination obligations under termination of the underlying contract, when the Northern Line Train Service Contracts and the termination occurs during the life of the contract, Jubilee Line Agreement. Unlike the agreements breakage cost and other contractual costs which are listed above, the contracts are not based on an initial not known before the event. For information only, amount of debt and so cannot be quantified in a the approximate maximum amounts of debt that similar manner. were envisaged to be drawn by the counterparty at the signing of the agreements are disclosed. For TfL acts as a guarantor in respect of Tube Lines the avoidance of doubt, these amounts may not (Finance) Plc’s external borrowings which have a represent the amounts that could be payable by TfL nominal value of £1,592m. under the guarantees but are shown here to give an indication of the relative size of each contract. No arrangements were entered into with another person under which that person gives a guarantee which TfL has power to give under section 160 (4) and no indemnities associated with the guarantees were given by virtue of section 160 (5) of the Greater London Authority Act 1999.

182 Transport for London > Annual Report and Statement of Accounts 2010/2011 Statement of accounts 183 Annual Governance Statement Contents

Scope of responsibility TfL is directed and controlled and the activities the Board on the development and execution • The Budget and Business Plan reflecting Transport for London (TfL) is responsible for through which it accounts to, engages with and of policy: the Transport Strategy and allocating ensuring that its business is conducted in leads the community. It enables TfL to monitor resources accordingly • Rail and Underground accordance with the law and proper standards, the achievement of its strategic objectives and the • Reviewing on a regular basis the and that public money is safeguarded and delivery of appropriate, cost-effective services. • Surface Transport implications of the Transport Strategy for its properly accounted for, and used economically, The system of internal control is a significant • Environment, Corporate and Planning governance arrangements efficiently and effectively. TfL also has a duty part of that framework and is designed to under the Local Government Act 1999 to make • Ensuring that those making decisions are manage risk and provide reasonable although The Audit Committee has been delegated arrangements to secure continuous improvement provided with information that is fit for purpose not absolute assurance of effectiveness. The the responsibility for overseeing corporate in the way in which its functions are exercised, – relevant, timely and gives clear explanations of system of internal control is based on an ongoing governance in TfL. It has received reports on the having regard to a combination of economy, technical issues and their implications process designed to identify and prioritise the implementation of the Code of Governance, the efficiency and effectiveness. Annual Governance Statement contained in these risks to the achievement of TfL’s policies, aims • Conducting its business on an open accounts and the results of the compliance review. In discharging this overall responsibility, TfL and objectives, to evaluate the likelihood of basis, subject only to the requirements of It receives regular reports from the General is responsible for putting in place proper those risks being realised and the impact should appropriate levels of individual and commercial Counsel and the Director of Internal Audit and is arrangements for the governance of its affairs and they be realised, and to manage them efficiently, confidentiality and security responsible for the annual assurance process. facilitating the effective exercise of its functions, effectively and economically. TfL measures the quality of services for users, which includes arrangements for the management The Commissioner of TfL, advised by his Chief The governance framework has been in place at ensures they are delivered in accordance with of risk. Officers, is responsible and accountable for the TfL since the year ended 31 March 2001. It remains TfL’s objectives and ensures that they represent delivery of the day to day operations of TfL. TfL has approved and adopted a Code of in place at the date of approval of the 2010/11 the best use of resources by: The General Counsel has the overall Governance, which is consistent with the Statement of Accounts. responsibility for the operation of the Code • Having in place sound systems for providing principles of the CIPFA/SOLACE Framework and for ensuring that it is integral to the routine management information for performance Delivering Good Governance in Local Government. The governance framework The Mayor, who serves as its Chair, appoints the functioning of TfL. In addition, the Director measurement purposes A copy of the TfL Code of Governance is on our TfL Board members. The Board determines and of Internal Audit annually comments on the • Ensuring performance information is collected website at www.tfl.gov.uk or can be obtained from agrees TfL’s strategic direction and oversees the adequacy and effectiveness of the Code and the at appropriate intervals across all activities TfL Secretariat, Windsor House, 42-50 Victoria performance of the executive team. extent of TfL’s compliance with it. Street, London, SW1H 0TL. This statement • Having comprehensive and understandable The Board has four committees: TfL is working to ensure that good governance explains how TfL has complied with the Code and performance plans in place is fully incorporated into the culture of the also meets the requirements of the Accounts and • Finance and Policy organisation and is applied consistently and Audit (England) Regulations 2011 in relation to the • Monitoring and reporting performance against transparently. publication of a statement on internal control. • Audit agreed targets TfL identifies and communicates its vision of its The purpose of the • Remuneration • Maximising its resources and allocating them purpose and intended outcomes for citizens and according to priorities governance framework • Safety, Health and Environment Assurance service users by: The governance framework comprises the systems • Having in place effective arrangements to There are three panels, made up of Board and processes, and culture and values, by which • The Mayor developing and publishing a Transport identify and deal with failure in service delivery members, which provide strategic advice to Strategy reflecting national and local priorities

184 Transport for London > Annual Report and Statement of Accounts 2010/2011 Annual Governance Statement 185 Contents

• Developing and maintaining an effective scrutiny • Developing and maintaining shared values TfL ensures that the core functions of the Audit • Ensuring that a senior officer is responsible function for its Investment Programme that including leadership values for both the Committee are delivered by: for all activities being legally correct, fully encourages constructive challenge and enhances organisation and staff reflecting public documented and appropriately authorised • Having an effective, independent TfL’s performance overall expectations and communicating these to Audit Committee • Developing and maintaining open and effective members, staff, the community and partners TfL defines and documents the roles and mechanisms for documenting evidence for • Having the Audit Committee develop responsibilities of the Board, Committees Panels • Putting in place arrangements to ensure decisions and recording the criteria, rationale and and maintain an effective standard of and officers with clear delegation arrangements that systems and processes are designed in considerations on which decisions are based conduct overview and protocols by: conformity with appropriate ethical standards, • Putting in place arrangements to safeguard and monitor their continuing effectiveness • Having an internal audit department which • Having a documented scheme of delegation against conflicts of interest in practice complies with relevant professional standards that reserves appropriate responsibilities to the • Ensuring that professional advice on matters Board and provides officers with the authority to • Setting targets for performance in the delivery • Having an internal audit plan that is driven by that have legal or financial implications is conduct routine business of services to ensure equality for all an annual evidenced assessment of the key available and recorded well in advance of business risks facing TfL • Having the roles and responsibilities of Board • Using its shared values to act as a guide for decision making and used appropriately members and senior officers clearly documented decision making and as a basis for developing • Substantially completing the internal audit plan. • Actively recognising the limits of lawful activity positive and trusting relationships within TfL Divergence from the plan is due to changes in TfL has developed and communicates the placed on it but also striving to utilise its powers business requirements requirements of the Code of Conduct, defining TfL reviews and updates standing orders, standing to the full benefit of the public the standards of behaviour for members and financial instructions, its scheme of delegation TfL ensures compliance with relevant laws, • Observing all legal requirements placed upon staff by: and supporting procedures that clearly define internal policies and procedures, and that it and integrating the key principles of good how decisions are taken and the processes and expenditure is lawful by: • Ensuring it is an organisation that has a climate public law – rationality, legality and natural controls required to manage risks by: of openness, support and respect • Ensuring that all activities are legally correct, justice – into its procedures and decision- • Having a clear hierarchy of governance fully documented, appropriately authorised and making processes • Ensuring that standards of conduct and documentation whose components are carried on in a planned manner personal behaviour expected of members TfL has made arrangements for whistle-blowing regularly reviewed and staff, between members and staff and • Making a senior officer responsible for ensuring and for receiving and investigating complaints between TfL, its partners and the community • Maintaining robust systems for identifying and that appropriate advice is given in all financial from the public by: are defined and communicated through codes evaluating all significant risks matters, for keeping proper financial records and • Ensuring that effective, transparent and of conduct and protocols accounts and for maintaining an effective system • Maintaining an effective risk management accessible arrangements are in place for making, of internal financial control • Putting in place arrangements to ensure that system receiving and dealing with complaints members and officers of TfL are not influenced • Maintaining proper records to ensure that the • Ensuring that risk management is embedded • Ensuring that arrangements are in place for by prejudice, bias or conflicts of interest annual accounts show a true and fair view and into its culture, with members and staff at all whistle-blowing to which staff and all those that expenditure has been properly authorised • Ensuring that an effective process, which includes levels recognising that risk management is part contracting with TfL have access and allocated in an appropriate manner an effective Remuneration Committee, is in place of their jobs to set the terms and conditions for remuneration of the Commissioner and Chief Officers

186 Transport for London > Annual Report and Statement of Accounts 2010/2011 Annual Governance Statement 187 Contents

TfL identifies the development needs of members • The annual report presenting an objective Review of effectiveness Other issues to be addressed during the year and officers in relation to their strategic roles, and understandable account of its activities and TfL has responsibility for conducting, at least relate to maintaining continued effective supported by appropriate training by: achievements and its financial position annually, a review of the effectiveness of its project delivery. One recent development that and performance governance framework including the system of has provided a significant improvement in our • Ensuring that its Board members and officers are internal control. The review of effectiveness is oversight and delivery capability is the extended provided with the necessary training to perform • Co-operating with appropriate organisations informed by the work of the senior officers within remit of the Independent Investment Programme their roles to ensure there is independent scrutiny of TfL who have responsibility for the development Advisory Group (IIPAG). This group provides its financial and operational reporting processes • Ensuring that its staff are competent to perform and maintenance of the governance environment, independent and impartial advice to the Board on their roles • Having a clear policy on the types of issues the Director of Internal Audit’s annual report, and all aspects of the delivery of the TfL Investment it will consult on or engage with the public also by comments made by the external auditors Programme, including maintenance, renewal, • Ensuring that the Chief Finance Officer has and service users about, including a feedback and other review agencies and inspectorates. upgrades and major projects. the skills, resources and support necessary to mechanism for those consultees to demonstrate perform effectively in his role and that this role TfL’s General Counsel has the responsibility for As a result of a major organisational review, more what has changed as a result is properly understood throughout TfL overseeing the implementation and monitoring streamlined governance arrangements will be TfL incorporates good governance arrangements the operation of the Code and reporting annually implemented. These include better integrated • Assessing the skills required by members and in respect of partnerships and other group to the Audit Committee on compliance with the project approval arrangements within the overall officers and committing to develop those skills working by: Code and any changes that may be necessary to TfL governance framework. to enable roles to be carried out effectively maintain it and ensure its effectiveness in practice. • Fostering effective delivery relationships and We propose over the coming year to continue to • Developing skills on a continuing basis to partnerships with other public sector agencies, In addition, the Director of Internal Audit improve and develop our governance arrangements. improve performance, including the ability to the private and voluntary sectors annually comments on the adequacy and We are confident that the current governance scrutinise and challenge and to recognise when effectiveness of the Code and the extent of processes and planned developments will enable outside expert advice is needed • Establishing appropriate arrangements to engage TfL’s compliance with it. us to meet the challenges identified above. with all sections of the public effectively TfL establishes clear channels of communication We have been advised on the implications of the with all sections of the community and other • Establishing appropriate arrangements to result of the review of the effectiveness of the stakeholders, ensuring accountability and engage with interest groups such as financial governance framework by the Audit Committee, encouraging open consultation by: institutions, businesses and voluntary groups and a plan to ensure continuous improvement of to ensure they are able to interact with TfL on Signed: ………...... …… • Having in place proper arrangements designed the system is in place. matters of mutual interest to encourage individuals and groups from all Significant governance issues sections of the community to engage with, The Chief Finance Officer (CFO) plays an active Balancing the need to manage within the Chair of TfL Board contribute to, and participate in the work of TfL part in TfL strategic decision making. The CFO is Government settlement and deliver the Mayor’s appointed and removed by the Board, reviews all • Making clear to staff and the public what it is priorities is the most significant issue facing TfL papers relating to financial management for the accountable for and to whom and one that will continue to present a challenge Chief Officers, Committees or Board in advance, to its management. Effective governance Signed: ………...... …… • Publishing, publicising and making generally attends all Board meetings and has unrestricted arrangements and senior officer oversight will available an annual report as soon as practicable access to the Commissioner. be maintained to ensure appropriate and timely after the end of the financial year responses to such issues that arise. Commissioner

188 Transport for London > Annual Report and Statement of Accounts 2010/2011 Annual Governance Statement 189 Chief Officers Members of TfL Contents

Steve Allen Peter Hendy CBE Managing Director Boris Johnson Daniel Moylan Commissioner Finance Chairman Deputy Chairman

David Brown* Ian Brown CBE** Managing Director Managing Director Surface Transport London Rail Peter Anderson Claudia Arney

Mike Brown MVO*** Managing Director London Underground and Managing Director Howard Carter London Rail General Counsel Charles Belcher Christopher Garnett

Leon Daniels* Michèle Dix Managing Director Managing Director Baroness Tanni Surface Transport Planning Grey-Thompson Sir Mike Hodgkinson

Vernon Everitt Managing Director Group Marketing and Communications Judith Hunt OBE Eva Lindholm

Chief Officer changes *David Brown left TfL on 31 March 2011. Leon Daniels was appointed Managing Director of Surface Transport in February 2011 **Ian Brown retired as Managing Director of London Rail on 4 November 2010 ***Mike Brown became Managing Director of London Rail alongside his role of Managing Director of London Underground following Ian Brown’s retirement

190 Transport for London > Annual Report and Statement of Accounts 2010/2011 Members of TfL 191 Members of TfL Directors of Crossrail Ltd Contents

Terry Morgan CBE Steven Norris Bob Oddy Chairman David Allen

Patrick O’Keeffe Kulveer Ranger Michael Cassidy CBE Patrick Crawford

Tony West Keith Williams Sir Joe Dwyer Sir Mike Hodgkinson

Steve Wright MBE Rob Holden CBE Robert Jennings CBE

Andy Mitchell Heather Rabbatts CBE

192 Transport for London > Annual Report and Statement of Accounts 2010/2011 Directors of Crossrail Ltd 193 Membership of TfL panels Contents and committees (as at 31 March 2011)

Members of TfL Committees of TfL Panels

Boris Johnson – Chairman Audit Committee Remuneration Committee Environment, Corporate and Planning Panel Daniel Moylan – Deputy Chairman Judith Hunt – Chair Daniel Moylan – Chair Baroness Tanni Grey-Thompson – Chair Peter Anderson Keith Williams – Vice Chair Christopher Garnett Sir Mike Hodgkinson – Vice Chair Claudia Arney Charles Belcher Sir Mike Hodgkinson Peter Anderson Charles Belcher Bob Oddy Judith Hunt Judith Hunt Christopher Garnett Patrick O’Keeffe Boris Johnson Eva Lindholm Baroness Tanni Grey-Thompson Steve Wright Steven Norris Sir Mike Hodgkinson Safety, Health and Environment Assurance Patrick O’Keeffe Judith Hunt Finance and Policy Committee Committee Tony West Eva Lindholm Peter Anderson – Chair Tony West – Chair Steven Norris Daniel Moylan – Vice Chair Christopher Garnett – Vice Chair Rail and Underground Panel Bob Oddy Claudia Arney Claudia Arney Christopher Garnett – Chair Patrick O’Keeffe Christopher Garnett Charles Belcher Steve Wright – Vice Chair Kulveer Ranger Sir Mike Hodgkinson Baroness Tanni Grey-Thompson Peter Anderson Tony West Judith Hunt Bob Oddy Charles Belcher Keith Williams Eva Lindholm Patrick O’Keeffe Sir Mike Hodgkinson Steve Wright Steven Norris Daniel Moylan Kulveer Ranger Tony West Tony West Surface Transport Panel Steven Norris – Chair Charles Belcher – Vice Chair Baroness Tanni Grey-Thompson Daniel Moylan Bob Oddy Patrick O’Keeffe Keith Williams Steve Wright

194 Transport for London > Annual Report and Statement of Accounts 2010/2011 Membership of TfL panels and committees 195 Remuneration Contents

This report outlines TfL’s policy The remuneration for each Member for the TfL engaged Towers Watson, one of the leading The total number of TfL staff receiving total year ending 31 March 2011 is shown on page 199. remuneration consultancies, to benchmark the remuneration of over £50,000 is on page 96 and regarding the remuneration of its remuneration of Chief Officers against a peer the remuneration of senior employees with a base Members and the Commissioner Policy for Chief Officers group of transport, infrastructure and engineering salary of over £150,000 is on page 98. Remuneration Committee companies with which TfL competes for As a result of pay awards only made to a few of and Chief Officers, who are The Remuneration Committee currently senior staff. responsible for directing the consists of five Members of TfL. The terms our high performers, some leavers and reductions of reference of the Remuneration Committee This concluded that TfL executives are paid at the in performance awards, the underlying number affairs of the organisation. include reviewing the remuneration of the lower end of the remuneration paid in comparator of TfL staff (excluding Tube Lines) earning total Policy for Members Commissioner and Chief Officers. organisations; the total compensation paid to TfL’s remuneration of more than £100,000 was 196 Chief Officers is generally below the lower quartile (194 last year). There has been an increase in Members are appointed by the Mayor and are The remuneration of the Chief Executive non-executive. Remuneration payable for 2010/11 of the market and significantly below the lower the number of staff at Crossrail earning total of Crossrail is determined by the Crossrail quartile for the Commissioner and the Managing remuneration of more than £100,000 (from 23 to for each Member (with the exception of the Remuneration Committee. Crossrail is a Deputy Chairman) related directly to the number Director, Finance. 31) due to the recruitment of senior staff to take wholly owned subsidiary of TfL with its own the project into its delivery phase. There was also of panels and committees on which each member Remuneration of senior staff governance arrangements. These include a board an increase in the number of severance payments served. Remuneration also took into account In recognition of the continuing difficult economic comprising executive and independent non- (from 34 to 84) made to those who would have those members who served as Chair of the climate and financial constraints on TfL, in 2010/11 executive directors as well as two non-executive earned total remuneration of less than £100,000 committees and panels, up to a capped maximum. the base pay of the Commissioner, Chief Officers, directors appointed by TfL and DfT. The Crossrail excluding the severance payment. The total and Directors was frozen for a second year, apart Remuneration levels are set for each Mayoral Remuneration Committee operates to a set of number of Tube Lines staff earning more than from the Managing Director, Finance whose base term, but are reviewed periodically to reflect the contractually agreed Remuneration Principles and £100,000 was 68 (37 of these staff have since left pay was reviewed in recognition of taking on a responsibilities and accountabilities of the role. a Remuneration Framework. the organisation). This figure has not previously broader range of responsibilities. In addition, With effect from 1 August 2004, the basic fee has been reported as Tube Lines only became part Remuneration policy all the Chief Officers and the Commissioner been £18,000 per annum. Members who act as of the TfL Group in June 2010. Furthermore, The policy of TfL is to provide remuneration decided to waive in their entirety the performance Chair, or as a member of a committee or panel, TfL is also reducing the number of Director packages for Chief Officers which attract, retain and awards made to them in respect of delivery in receive additional fees of £4,000 per annum (as level positions by 25 per cent, or 13 posts, as it motivate individuals of the high calibre required to 2009/10. The combined sum in performance a Chair) and £2,000 per annum (as a Member) for manage such a large, complex organisation. restructures the organisation. each appointment. The maximum payment in awards waived by the Commissioner and Chief aggregate is set at £24,000 per annum, except Remuneration packages reflect their responsibilities, Officers amounted to around £500,000. The Other benefits for the position of Deputy Chairman. The annual experience and performance and the market from Commissioner’s salary was £348,444. Senior officers are eligible to receive the following: which TfL recruits. The Remuneration Committee fee payable to him was at the rate of £60,000 per In relation to the Directors, a deferred incentive • Private medical insurance annum. Since the end of the financial year this has established a reward structure commensurate plan was introduced to incentivise the delivery of has increased to £115,000 per annum to reflect an with this policy, which includes a base salary medium term objectives such as the successful • Annual health check-ups increase in the days worked a week from two to and a performance award scheme against the delivery of the transport improvements for • Subscriptions to professional organisations four. Most Members also received free travel for achievement of a range of financial and operational the 2012 Games. Therefore 25 per cent of the themselves and a nominee valid on TfL transport service performance targets. performance award opportunity previously • Pension business areas. available to Directors has been deferred until 2012.

196 Transport for London > Annual Report and Statement of Accounts 2010/2011 Remuneration 197 Contents

• Where appropriate, recompense for loss of • Pension payable in the event of retirement due Members’ remuneration For the year ended 31/03/11 benefits from previous employers and/or to to ill-health £ comply with TfL’s policies • An employer contribution of up to 10 per cent Boris Johnson Not remunerated by TfL • As with all TfL employees, the Commissioner of salary to the TfL Supplementary Pension Daniel Moylan 60,000 and Chief Officers are provided with a free Scheme, a ‘defined contribution’ scheme which Peter Anderson 24,000 travel pass for themselves and a nominee provides additional benefits for those earning Claudia Arney 21,500 valid on TfL transport modes. Chief Officers above the cap Charles Belcher who joined after 1 April 1996 are eligible to 24,000 The Commissioner is entitled to a pension based receive reimbursement of 75 per cent of the Christopher Garnett 24,000 on TfL service equal to what would be due under cost of an annual season ticket on National Baroness Tanni Grey-Thompson 24,000 the TfL Pension Fund if the cap did not apply. Rail. Chief Officers employed by predecessor Sir Mike Hodgkinson 24,000 organisations prior to April 1996 receive Judith Hunt 24,000 National Rail facilities in line with the policy of Eva Lindholm 22,000 the predecessor organisation Steven Norris Not remunerated by TfL Pension arrangements Bob Oddy 23,500 Chief Officers are eligible for the following Patrick O’Keeffe 24,000 pension benefits: Kulveer Ranger Not remunerated by TfL • Membership of the TfL Pension Fund, a ‘defined Tony West 24,000 benefit’ scheme which provides for a pension Keith Williams 22,000 payable from age 65, based on 1/60th of Steve Wright 24,000 pensionable salary for each year of service Members receive reimbursement of travel and subsistence expenses. The expenses claimed for all • Pensionable salary is capped for joiners from Members in 2010/11 was less than £500 in total. 1 June 1989. For 2010/11, the cap was £123,600 • Up to 25 per cent of the value of the pension can be taken as a cash sum (under current legislation) • Lump sum death benefit of four times salary on death in service • Dependant’s pension and children’s pensions are paid on death in service and after retirement • Member contributions payable at the rate of five per cent of pensionable salary

198 Transport for London > Annual Report and Statement of Accounts 2010/2011 Remuneration 199 Document reference DJ11_005

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